Published: Fri, March 03, 2017
Finance | By Laverne Griffith

Snapchat debuts at 30% premium of IPO price

Snapchat debuts at 30% premium of IPO price

Shares of Snap Inc., the parent of Snapchat, jumped to $24 per share after it began trading Thursday in the year's most-hyped technology initial public offering - 41% over its $17 opening price.

Snap's IPO also is the first notable tech IPO of 2017.

Unlike many companies like Uber and Airbnb with sky-high valuations, Snapchat chose to go public earlier in its monetization, probably because it's better to go public before the market considers the company overvalued. Its student-run endowment fund was among the company's first investors.

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Investors' ardor for Snap shares - which rose almost 50 per cent in its market debut on Thursday, giving it a market value of nearly $30-billion - bodes well for future tech IPOs. Despite the popularity, analysts warn that the company is young and has yet to generate profits. Snapchat co-founder Evan Spiegel, who is 26, secured a 17 per cent stake worth an eye-watering $4bn (£3.26bn). Now, it's trading more than three times its IPO price, near a record high. The company also acknowledges that competing products, like Instagram Stories, may impact its user growth and overall bottom line. This caused the founders to explain in their filing that number of users and engagement can be lumpy and unpredictable - usually two things that the market really does not like. But the price of Snap stock - and Snap's valuation as a company - could go up throughout the day, increasing Spiegel's net worth by millions - and possibly even billions - in hours. Snapchat is known for its disappearing pictures and video, which aren't archived and thus promote spontaneity. That explains why Spiegel is hoping to convince investors it's not merely a social media company, but instead a "camera company". The valuation is now closer to $33 billion.

"I don't really understand why he and his friends use the app so extensively, but I am trying to keep up", she said.

Snap just needs millions more like Murphy willing to make time for yet another social network.

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