All IPOs are fairly ridiculous when it comes to pricing, subscribing, and issuing shares. Keep in mind that as an individual investor without an established relationship with one of the companies underwriting the IPO you cannot get the IPO price at all.
So, here is how it works.
This is where it gets tricky. For recent comparisons, you can look at Facebook — which did very well — and Twitter —which did not.
5 reasons to buy Snap
The main thing to focus on is that Snap loses money, a lot of money. You have to really believe in a company to buy into that. There are exactly TWO tech companies of this magnitude making this work right now, one is Google, and the other is Facebook.
Everyone else is flailing about as this advertising-only revenue strategy falls apart. And if you have to keep spending money to attract new users, and support that greater number of users, then you still end up losing money.
The upside to this is supposedly that Snapchat is all about the millennials and those under 30. How many years does Snapchat have left?
Snap Valuation: Is Snap Overvalued?
Remember that Facebook was under pressure from the up and coming Instagram, and had to buy them out when Instagram became the hot, new thing that young users were flocking to.
Why believe that Snapchat will be any different?
Snap ipo good buy
The second thing that freaks me out is the share structure. All these shares you are buying have no voting rights. The reality is that shareholders have little to no ownership of companies anymore these days, but to codify it makes you wonder what exactly are you buying? You have no ownership rights, and no dividend.
WATCH: Here's who got even richer from Snapchat's big IPO
If everything does according to plan and user growth increases, and advertisers keep coming and spending more money, then, this is the next big thing. But, if one of those things fails to happen, this is the next company scrambling to find something to replace advertising as its revenue stream, and nobody has figured that out yet.
At the time of publication, the author did not own shares in any of the stocks mentioned in this article. This is not a recommendation to buy or sell stocks.
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The author is not a financial advisor, and does not hold himself out to be one. Good overview, thanks. Your email address will not be published.
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Should you buy the Snap IPO?
Comments Good overview, thanks. Trackbacks […] only someone could have seen that a money burning company like Snap going IPO on the promise that more users would someone end the money burning with greater revenues but no […]. Leave a Reply Cancel reply Your email address will not be published.