Where will Snapchat go next?
On 2 March, Snap Inc. went public on the New York Stock Exchange. The tech giant was valued at $28 billion at the end of its first day of trading, with its share price having rocketed from a guide price of $17 to a closing price of $24.48.
Facebook's wariness of the threat posed by its Silicon Valley neighbour has proved entirely justified. With the $3.4 billion share sale alone, Snapchat co-founders Evan Spiegel and Bobby Murphy already surpassed the buyout offer Facebook CEO Mark Zuckerberg once made them. By holding out, they have achieved the largest IPO since Alibaba’s in 2014.
Announced back in early February, Snapchat’s IPO appeared ambitious, even after the photo-sharing company lowered its original valuation expectations to $22 billion. The five-year-old company’s revenue increased by 600% in 2016, but there have long been questions over a business model that anticipates substantial future operating losses and foregoes profitability. Muddying the waters further still was the choice not to sell voting shares, meaning its executive board would still keep total control of the entire company even with public funds.
Clearly this did little to deter investors. The question now is whether the optimism will pay off. In the lead-up to the flotation, analysts used Twitter and Facebook as touchstones by which to assess Snapchat. But both of these companies’ fortunes have diverged in dramatic ways since going public, making it hard to know if investor confidence will prove justified in the long term.