Snap Have Just Fallen Below Their IPO Price for the First Time

Financial Times
In the list of shocking recent disappointments, Snap's dismal IPO valuation doesn't rank particularly high, but it served as a stern warning for other successful tech firms about what happens when you put your chips down at the wrong time. Taking a company public is an incredibly risky move, but given how much success Snap were having prior to their rebranding and expansions into hardware development, it seemed like a considered decision, and a likely success.

The stock market is a fickle, dangerous place, and it doesn't matter how much mounting success you may build up, you can still get screwed. Make no mistake, Snap were screwed, royally. The shares came out priced at $17 a go, and investors bought big as the valuation rose to as much as $27. Then, on release day, it dropped as millions of shares were either traded off or dumped by canny stock market players.

Many of these shares were sold off to ordinary folk who had heard the news about Snap's gathering success and wanted to get in on the ground floor. First time investors, hobbyists, people who saw The Big Short and think they understand the stock market now, etc. They got a nasty surprise when the valuation started moving in the wrong direction, but it's the company themselves who have taken the hardest hit of all, and now the price-per-share has dropped below the original market price - $16.99

For various, complicated reasons, the imbalance of demand for stock and share valuation left Snap in the lurch, leaving around $1.16 billion of potential profit in limbo, before it was gobbled up by the Wall Street set, as is usually the way. The main problem though is that, like all social media platforms, a large contingent of Snap's revenue is theoretical, depending entirely on the tide of advertising engagement, which is far harder to predict than physical sales. Sure, they've got the Spectacles, but they make up a tiny percentage of their total earnings.

With the dropping price, Snap are now officially a company that has lost money for public investors. Not a good look. Their destiny hangs in the balance, especially with the 150 day lock on share sales ending at the end of this month. Once that's gone, staff and inside investors will be able to sell their shares, and if they do that, the market price drops even further.

Despite how well Snap are doing in other areas, the headline for many is going to stay largely the same - "this company lost me money". This won't bankrupt the company, but with a plummeting market price, hiring new staff is going to be difficult, which will in turn slow their rate of expansion and likely interfere with all their lofty plans for drones and all the other secret hardware projects chugging along behind the scenes. Snap's IPO woes won't kill them, but they should serve as a cautionary tale to all the other up-and-coming tech firms - beware of Wall Street.

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