In anticipation of the initial public offering of shares of the company Snap, to be held on March 2, the regional Director of the social network for investors eToro in Russia and the CIS Paul Salas shared with the editors vc.ru arguments about whether the fall in the share price of the developer of messenger and what it might mean for the whole of the market for technology IPOs. Why Snapchat stock will go up. First, it is the largest placement in the market for a long time. If you believe the study EY – Global IPO Trends for all of 2016 through the IPO were more than a thousand companies, which brought in global stock market only $132 billion.
In all, 21 companies from 1055 to list its shares on the stock exchange capitalization exceeded $1 billion. While one Snapchat plans to raise $3 billion. Second, the market kindly apply to IPO in the technology sector, regardless of the current state of Affairs. Shares of technology companies that became public in 2016, traded on average 90% percent above the offering price.
Only two technology companies out of 14 have passed through the IPO in 2016, traded lower initial cost. Thirdly, it is not excluded that large players will exclude reputational risks. If the IPO fails, it is likely that such technology companies as Spotify, Airbnb, Dropbox, and others that plan to become public in 2017, might change your mind.
Investment banks and stock exchanges is not interested in such developments, because they will lose a large number of commissions, and the memories of the failed placement APPDynamics too fresh company was bought by Cisco a few weeks before the IPO. So, we dealt with a status of Snapchat in the short term. The shares will be popular and expensive. But what about the more distant future.
In my opinion, perhaps buying stocks in the IPO of the messenger seems like a good idea, however, long-term investment in the paper after the rally may not be such a good investment. Snapchat constantly comes up with new ways to monetize the project. Messenger is used daily by 158 million users, who on the day pass to 2.5 billion messages, view 10 billion video place 9 thousand photos per second.
Revenues Snapchat in 2015 amounted to $52 million in 2016, $350 million, and in 2017 is expected to amount to $1 billion, follows from company presentation. More than 98% of revenues on advertising have. Digital advertising market in 2016 amounted to $195 billion, and in 2020 could rise to $335 billion. And on advertising in mobile applications will account for 73,7% of the total, whereas now only 55,84%.
Of course, this trend is likely to attract a lot of new players, resulting in Snapchat will need to exert more efforts for a successful fight. Despite the impressive growth of revenues and net loss for 2015 and 2016 were $382 million and $520 million, respectively, due to significantly increased marketing costs, which rose more than 300%. Most importantly, what to look for when investing in a company at the IPO stage does the hype around this company.
Lets look at IPO Facebook and Twitter. Placement of Facebook shares on the market was the first sign, and therefore the majority of investors doubt as to the appropriateness of this step in the future growth of quotations – it took them six months to come to terms with the idea that this social network can be worth its money. On the day, shares of Facebook rose from $28 to more than $135 apiece.
With Twitter, everything was easier. The players realized their mistake and wanted to improve, and Twitter shares were supposed to be a second chance. As a result of universal excitement, the quote took off two months almost doubled to $73,30. However, when the dust settled, investors realized that the value of Twitter is too high, then began selling.
Extremely high risk that Snapchat will soon repeat the history of Twitter than Facebook. The thing is that the target audience of Snapchat are Millennials, who can easily lose interest in fashion app. Lets draw an analogy. Facebook was the largest player, as it is a mass product, which is used by all family members.
Schoolentrance Twitter is a social network – a news aggregator, and so proper development not received. To monetize the service completely failed, despite the sustained growth in new users. Few people remember such a network as Vine, where users can record and share short videos. Vine was completely destroyed Instagram, which provided a similar feature on its platform.
As it relates to Snap Inc. The fact that Instagram already copied the main “trick” Snapchat “Story”, which on a daily basis is used by over 150 million people. Snapchat is estimated at $25 billion – this can reach half of the value of Instagram, according to Forbes, and the ratio of capitalization to the calculated profit (Price-To-Sales Ratio) in 2017, exactly 25/1 – much more than standing firmly on his feet Facebook, 10/1. Of course, the profit of the messenger will continue to grow, but at the moment it looks too expensive.
Is it confined to a short term speculation or to communicate with Snapchat share your future, only you can decide.