SnapChat has managed to pull in $3.4 billion with its IPO which was a much discussed business event in the past few weeks. The company’s ability to garner public favour comes as a surprise for many especially since it has not exactly seen the best of user growth in recent times.
Changing perception among investors?
Does this herald a changing perception among the investing class of the public? This is the million dollar questions that market analysts are asking themselves. After all, Snapchat has many downsides that should have, traditionally, subdued their prowess at the markets. The business is new and the concept is new too. New user acquisition is not impressive and Snapchat also offers shareholders nothing by way of control over the actually business strategies or direction. Not very long ago, these would have been good enough reasons for an abysmal performance with an IPO but Snapchat’s performance has belied all of this. The company offered its shares for &14 to $16 and orders focused on $17 to $ 18 showing the business had still under- estimated the appeal it has for investors. There was adequate interest to price the shares higher although the company did not and that’s saying something about Snapchat’s sway in the marketplace.
Snapchat is the biggest social media listing after Twitter hit the markets. It is also the first tech company to go public in this year.
Lessons learned from the Snapchat IPO
Snapchat has proven that market experts do not know everything about the public sentiment. The investors have made their preference known for the company that can give them some great prospects for growth even if they are not raking in the profits at present. In Snapchat’s, there were plenty of other doubts about the business and also the matter of overheated valuation but these have not deterred the investors by much at all. This could be the way the new generation investor will swing and this could be a valuable lesson for IPOs and market analysts alike.
Many tech companies have actually stayed clear of IPOs because they believed that their shortcomings would make them unpopular at the markets but Snapchat’s bold foray has proved them wrong in some key ways. In main, the idea that business with poor cash flow and lack of revenue growth should stay away from IPOs may change with this. Hopefully, these companies will get over their fears and doubts and go public soon, too.