Snapchat Falling Below its IPO for the First Time in History

snapchat IPO price

We all know Snapchat is a messaging app that helps us send photos, videos and text messages, just like every other messaging app. But here is the great thing about Snapchat: the sent content disappears after several seconds. Almost 150 million people use Snapchat every day. And to put it roughly, they consume 800 hours of video per second. But oh no: the Snapchat parent had a rough day on the stock market. It closed at $16.99. So we can say that Snapchat parent’s stock price has fallen below its stock trading price at the time of IPO. Note that the IPO price is $17.

Snapchat IPO price: where did it all start?

Now let’s back up a bit to understand what is really going on. So, besides its messaging feature, Snapchat features Stories: those are photo or video messages that can be seen only for 24 hours. It also has Memories: saved photos for sharing later, and stickers to embellish messages. So, only by looking at its features we know it is going to be popular among teenagers, right? According to a survey, 26% of people between 12 years old to 24 years old used Snapchat the most. Facebook was their second choice.

Snap is not an extrovert: we don’t know much about it, for example about its specifics of the company’s advertising model. Or, we also don’t know if it constitutes a stable, long-term business plan. So, Facebook CEO Mark Zuckerberg tried to buy Snapchat for $3 billion in 2013. Mind-blowing, isn’t it? But Snap’s CEO Evan Spiegel turned him down. After the incident, it seems like Facebook, with its Instagram, has tried to duplicate Snapchat.

Its biggest threat

Snapchat is probably sleeping with its eyes open now. The biggest threat to Snapchat business is probably the fact that Facebook and Instagram could turn everything around overnight and copy any new Snapchat feature. I mean, look, Instagram has over 600 million users. And what happened? It launched a “Stories” section. And it almost exactly copies Snapchat’s own “Stories” section. After that Instagram generated 150 million daily Stories users. And that number is as many as daily users as Snapchat entire app could generate in five years.

So, back to the mind-blowing news: Snapchat stock price falling. I think we got the answer to where it all started. Now, you may be thinking that it is not a big deal, but it is. And here is why: this means that overall, public investors have lost money on the company. And you all know what is hard to recover from? Money-losing reputation.

snapchat IPO price

But the employees and pre-IPO investors still have the shining hope in their hearts. I mean, the company’s market cap is still approximately $23.8 billion. And it is higher than Snapchat’s private market valuation: $20 billion. And after the 150-day lock-up period, everyone can start selling shares on July 31. The biggest concern of all right now is that too many people will try to sell their stock shares at once. And the result won’t be inspiring: it will bring the share price down.

Snapchat reported its first earnings in May. The results disappointed investors. Its next quarterly results will be revealed in August, making a significant impact on the stock price. And right now, July is going to be a slow month, they say, for tech IPOs. So buckle up for the slowest ride ever.

Armen Margarian

Armen Margarian is an attorney with The Margarian Law Firm.

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