Snap snaps winning streak, loses 12% on Day 3 of listing

S V Krishnamachari
snap shares fall, snap ipo, snap listing, snap valuation, snap cofounders, evan spiegel, bobby murhpy

The Snap euphoria is over in just three days. The company, which had a stellar listing last Thursday at 44 percent premium to its issue of $17 per share, snapped its two-day winning streak and lost 12 percent to close at $23.77 on Monday, its lowest since the $3.4 billion initial public offering (IPO). 

The first two days were exciting for the investors, with Snap Inc. shares closing 10.66 percent higher at $27.09 on Friday, after the 44 percent gain on listing. However, as predicted by an analyst, the stock disappointed investors and that too, within a short time of a dream listing. 

The exaggerated valuation of the loss-making Snap Inc., which owns photo-sharing mobile app Snapchat, was reminiscent of a similar trend witnessed in case of Twitter, whose shares listed at 72 percent premium to the issue price of $26 per share on November 7, 2013.

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However, the microblogging site's shares took a hit within a short span and on December 1 that year, closed at $41.57 apiece, down 7 percent from first's day closing of $44.90.

An analyst downgraded Snap Inc. while another saw it a healthy correction.

Laura Martin, an analyst at Needham, said that buying Snap Inc. shares was akin to purchasing a lottery ticket, while Ken Polcari of O'Neil Securities said, "It's not necessarily because there's something wrong with it. It's because it probably moved way too far, way too fast," according to a Reuters report.

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The news agency cited an analysis to say that 16 of the 25 largest technology IPOs have seen a sharp fall in their listing day closing price in their first 12 months of going public. 

Snap Inc., which sold 200 million shares to investors through its IPO, also saw the wealth of its co-founders — Evan Spiegel (26) and Bobby Murphy (28) — rise to $5.2 billion each. The two executives added $1.6 billion each to their wealth as a result of the bullish listing on the NYSE.

Snap Inc. incurred a loss of $500 million on total revenues of $400 million in the calendar year 2016. It had about 100 million users. The losses widened from $382 million 2015, though revenues spiked from $59 million.

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