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Snap IPO crackles and pops

Snap spectacles

Snap finished its first day of trading with share prices increasing 44% on the initial $17, finishing at $24 with a market capitalization roughly $33 billion.

The IPO has been one of more anticipated in recent years, with rumours beginning late last year. Snap certainly has captured the imagination of users around the world, but the success of its first day trading certainly has surprised a few commentators. Perhaps one of the reasons is a relatively dry IPO market in the last 12-18 months, however the Snap pop does continue a trend of technology companies beating expectations on the first day:

  • Facebook went public on May 18, 2012, starting at $38 but finishing 0.61% up at the end of the day
  • Twitter went public on Nov. 7, 2013, starting at $26 but finishing 72% up at $44.90
  • Alibaba went public on Sept. 19, 2014, starting at $68 but finishing 83% up at $93.89
  • LinkedIn went public on May 19, 2011, starting at $45 but finishing 109% up at $94.25

Explaining the market excitement is a tricky one, but one area which Snap is looking relatively promising is AR. There are very few AR (and VR) platforms on the market currently, and almost none who could match the 160 million Daily Active Users which Snap commands. AR is an area which is starting to become more prominent, and the ready-made environment which Snap has puts it in a relatively good position.

The release of Spectacles is another interesting move which allows it to operate in the platform and hardware AR/VR markets. Another area which will encourage investors is the success of Pokémon Go last year. The game itself claims to be AR, although many industry commentators will contest this, but did normalize the technology in the eyes of the consumer. Pokémon Go recorded roughly 500 million downloads, demonstrating there is certainly room for growth for Snap.

“Snap duly delivered on the hype that surrounded its IPO, with a 44% gain in the share price on day one echoing the heady days of the dot-com bubble,” said Chris Beauchamp, Chief Market Analyst at IG Group.

“The underwriters and company management will be pleased to see the stock in such high demand, but the easy work is now behind it. Snap is now just another company on the New York stock exchange, and will be judged by the same metrics as others of its ilk. It has to show real user growth from this point onwards, and a firm strategy for making money off those users”

The IPO certainly has caused a stir in the market, though the excitement could be short lived. With an IPO market which has been relatively baron recently, there is always a risk the stock could decline over the next couple of weeks. That was certainly the case with Facebook, however a 44% boost on the $17 price does give the team a bit of breathing room.

The next step for the team will be to demonstrate Snap isn’t a one hit wonder. Facebook’s success over the last couple of years has been its ability to move into new segments, Twitter’s downfall was that it couldn’t and still can’t. The initial IPO success is a small win for the team, how it reacts over the next six months will tell us whether Snap is a Facebook usurper, or a Twitter pretender.


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