The maker of Snapchat, the app that let’s users send disappearing-photos and messaging service, Snap Inc., offered their Initial Public Offering slightly above the range marketed during their trading debut.
The opening for Snap Inc. shares was at $24 and they traded to the maximum price of $25.42 per share, this Thursday. Due to this the valuation of the company jumped to $29 Billion according to the number of shares after the offering.
About 200 Million shares of Snap Inc. were sold in their IPO each at $17, which was higher than the marketed range of $14 to $16. At the IPO price of $20 billion, Snap’s market valuation is about 21.4 times more than EMarketer’s estimates. The valuation of Snap went public at four times Twitter Inc.’s cost and at least 2 times Facebook Inc.
About $3.4 Billion were raised in Snap’s IPO, which happens to be the biggest IPO in social media space since Twitter’s IPO. It is also US’s first tech company to list an IPO this year. Bobby Murphy and Evan Speigel, founders of Snap Inc. headed to Goldman Sachs Group Inc. office in lower Manhattan after ringing the opening bell of the stock exchange on Thursday to wait for the first trade. The opening of the shares was about two hours later.
Morgan Stanley and Goldman Sachs were leading the offering by Snap and Goldman Sachs is the stabilization agent as well tasked to ensuring a smooth first day of trading. The company needs to convince their investors to trust the management as it was the first company in US to list non-voting shares in the deal filing. This means that the stockholders have no way to change directors and compensation of the executives.
They can’t bring up these issues in the annual meeting. Both the co-founders will be responsible for all decisions taken in Snap Inc. whether they lead to success or failure. Even after revenue climbing sevenfold, Snap Inc. posted a $515 Million net loss last year.
They have a lot of things to improve and boost revenues per user. They have to address slow user growth and increase profitability of the business. The user growth slowed by 50% in Q4 and this was the first time since 2014.
Including stock options that are unexercised and some other convertibles summing up to 1.39 billion of fully diluted shares, Snap will have a value (fully diluted) of about $23.6 Billion.
In light of this information, the price of Snap Inc.’s shares could be priced at $19, but the executives wanted that the shares make a very decent gain in their first debut.
Clearly that was a smart move after seeing how the market reacted to their price.