Snapchat shines through rough first week

Graphic created by Jordan Reis.
SNAP INC. has had some trouble in its IPO week but saw a rally from short sellers. Short sellers are people who bet on the stock price going down. If enough people short sell a stock it could actually end up making the price of each share rise, but only if people are buying the shares being sold.

Patrick Budicini
Staff Writer

Cheers erupted on the floor of the New York Stock Exchange on the morning of March 2 after Snap Inc. co-founders Evan Spiegel and Bobby Murphy rang the opening bell officially announcing Snap’s long-awaited initial public offering (IPO).

After just over a month since the original filing for IPO, Snap Inc, has finally gone public. Snap enjoyed a successful first day, as investors were excited to invest in the company known for Snapchat, a wildly popular image messaging and multimedia application.

Snap shares closed on the first day of training on the New York Stock Exchange at $24.48, up 44 percent from its public offering price of $17 set by the company.

The opening price of just over $24 made Snap’s market capitalization $34 million and is responsible for $3.4 billion being raised in the IPO, according to CNBC. These values crush Snap’s initial public offering filing information where they were seeking $3 billion and expected a market cap of around $25 billion, Business Insider reports.

The sale came at a favorable time considering a slow in the number of tech IPO’s. This is the first tech IPO of 2017 and is the largest since Alibaba in 2014. It has showed very consistent first day results compared to many of the recent tech IPO’s, including LinkedIn and Twitter, who all closed on their first day of trading well above their IPO share prices.

Snapchat is very popular amongst millennials, and its newly public stock is, too. Trading activity on a popular commission-free online brokerage firm, Robinhood, jumped by half on Snap’s first day public and the median age of investors was down significantly.

The company’s usual demographic is 29 years of age, but the median age for Snap investors was just 26, The Wall Street Journal reports.

Among these young investors was Rebecca Shoenthal, a young journalism major from the University of North Carolina, Chapel Hill. The Wall Street Journal says that Ms. Shoental, like many other young people, decided to invest in the company, even though they do not typically invest.

They cite a variety of reasons, including general excitement about supporting a company whose service they use all the time.
It’s no surprise that Snap attracted many new young investors, considering a large part of Snapchat’s 158 million daily users are between the ages of 18 and 34.

These are people who enjoy sending silly pictures with unicorn tongue filters and has changing capabilities, and have now began to dip their feet into the equity market to support a company they love.

Though the initial public offering was largely a success, there are concerns for the future of the company, who has been unable to convert the flashiness and popularity of the application into cash, according to Thomson Reuters.

Aegis Capital Corp. Analyst Victor Anthony is one of many analysts who is skeptical of Snap’s success. He describes his concerns to the Wall Street Journal, which include “stiff competition Facebook, the lack of commitment to spending from ad buyers and the fact that there’s no clear path to profitability.”

Many analysts feel that the stock is overpriced and are predicting it to tumble as investors may have a disconnect between fundamentals and valuation, said Susquehanna Financial Group analyst Shyam Patil.

Despite Snap’s current euphoria after a successful initial public offering, there is no guarantee it will last in the long-run.