When Snapchat parent company Snap launched on the New York Stock Exchange on March 2nd, the stock became a hot topic both in trading circles and mainstream media. The initial public offering (IPO) for Snap raised $3.4 billion, and became the most important social media public offering since Twitter launched on the NYSE in 2014. 200 million Snap shares were sold and the first day of trading saw share prices skyrocket from the initial price of $17 to $24, increasing the market value of the company on that day from around $20 billion to over $30 billion.
Millennials Rush to Buy Snap Shares
Many of the people who invested in Snap, as in the case of the IPOs for Facebook and Twitter, were younger investors from the millennial generation. The stock was hugely popular on simple stock trading apps aimed at this demographic, and analysts believe a lot of people invested in Snap as their first or only foray into the stock market.
This makes a lot of sense, given that social media share prices have often confused investors who are not entrenched in the user base of the products, given it can be hard to see exactly how things like Snapchat actually make money.
Additionally, while Facebook and Twitter have grown to be accepted by people of all ages as communication platforms, Snapchat has established itself as a messaging app that mainly millennials and teens use. This was thanks to its unique selling point (at the time of its launch) of messages disappearing after a set time, rather than being held on the internet essentially forever. Younger users appear to value the privacy and lack of permanence for their conversations and shared pictures that Snapchat offers, and as many early Snap investors attested, bought the stock because they believe and identify with the product.
On that first day, those who bought Snap shares at $17 were understandably thrilled to see the price shoot up, and despite the fact they have trended downward since then, they have never gone below the original price – the lowest price to date was $18.05 on May 11th. However, holding Snap shares has probably been a very interesting learning curve for first time investors, showing in a very short time the impact of different events and rival efforts on a given company’s price.
How Instagram Affected Snap’s Share Price
One lesson Snap investors will have learned is just how important a brand’s unique or differentiating features are to its value. When Instagram, which is owned by Facebook, launched new features that included disappearing messages, and notifications when another user screenshots a message before it disappears, Snap shares plummeted. This was on April 11th, and saw share prices fall to $20.70 (they had been at a high of $23.83 the week before), and keep dropping, even falling below the psychological $20 threshold a few days later.
How Controversy Affected Snap’s Share Performance
Another experience that Snap’s investors will probably have learned from was the drop the share prices took when CEO Evan Spiegel was criticized for his comments about not focusing on growth in India or Spain, which he reportedly called ‘poor countries’. Share prices dropped 1.5% when these comments were made public in mid-April (he actually made the comments in 2015). This showed that the markets can react to even minor controversies in terms of how the leaders of businesses are seen to behave.
Snap’s share prices have already been through some significant ups and downs, and so while they may not have been the fantastic investment millennials who jumped on the stock hoped for, watching them will certainly have taught new traders some worthwhile things about just how reactive the markets can be.