The IPO for Snap Inc. starts trading tomorrow on the New York Stock Exchange with the ticker symbol, and Millennials everywhere are wondering if they should buy stock.
Here’s the thing: SNAP is the first of the high-profile tech companies to go public after shooting to fame since Twitter in 2013. Twitter had a smashing good opening day but, since then, we all know what happened to Twitter — not great things. Facebook, on the other hand, had a poor opening day but has since climbed to become one of the most valuable companies in the world.
As CNBC is reporting, the SNAP IPO has a bit of a problem — experts are divided in comparing it to Twitter and Facebook which makes the decision to buy a confusing bet with 50/50 odds.
Lots of people think that SNAP is like Facebook, and will continue to innovate after the IPO. Also, lots of people think that SNAP CEO Evan Spiegel is a genius and will definitely steer the SNAP ship to shore. He’s a guy that is so obsessed with perfection that he’s designed the IPO so common stock will have zero voting rights — Spiegel insists on maintaining control of his product. Some say that if SNAP fails it will be because Spiegel failed.
Lots of other people insist that SNAP is more like Twitter and is doomed. Social Capital partner Chamath Palihapitiya, a former Facebook executive, said Wednesday that, “It’s tracking to look more like Twitter than Facebook simply from the perspective of the top-line growth doesn’t support a long-term-oriented growth model,” he said, citing slowing user growth toward the of 2016, which Snap revealed in its S-1 filing earlier this month.
As for the common stock’s “no voting” restriction, he said “It’s one thing to give common investors a vote and then have 500 for a different class, but it’s another to give them none entirely,” he said.
SNAP Stocks: To Buy, or Not to Buy?
Here’s what we think:
Snap has a smaller user base than Facebook and Twitter, but that doesn’t mean they always will. However, Instagram Stories was a blatant grab by Facebook of Snap’s audience and so now a large portion of Snap’s already small base is divided between the two platforms.
Also, a large portion of the appeal of Snap is that the platform serves minimal ads to its users, but advertising is a huge revenue stream for any organization, including Snap, and so that user experience may not last for long. Remember how annoying ‘Promoted Tweets’ became? Yeah, so does everyone who barely uses the chat platform anymore.
Suffice to say, analysts are future-valuing Snap and that makes a lot of investors weary. So does that fact that Millennials are only loyal to tech brands until something better and more private, with fewer ads, comes along. Can investors trust Millennials to stay loyal to Snap, even if they need to make big revenue gains from advertising? Probably not.
The Bottom Line:
Should Millennials buy stocks in Snap tomorrow when it releases its IPO on the NYSE? It’s a toss-up but, if you have enough disposable income it may be worth the risk.
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