by: Shanthi Rexaline, Benzinga Staff Writer
The hype and fanfare surrounding Snap Inc SNAP's IPO have proved evanescent, with the stock dropping below its opening price of $24 in double-quick time. The saving grace is it is still holding above its offer price of $17.
For those not keeping up with the recent developments surrounding Snap's IPO, here is a quick recap:
- Ephemeral photo and video sharing social networking platform Snap offered 145,000,000 shares of its class A common stock (non-voting shares) in an IPO and an additional 55,000,000 shares were offered by selling shareholders.
- The shares were offered at an IPO price of $17.
- Subsequently, share of Snap were listed on the NYSE under the ticker symbol SNAP on March 2. The shares opened at $24, a roughly 41 percent premium to the offer price and settled the session up 44 percent at $24.48.
- The shares tacked on an incremental 10.7 percent last Friday, its second day following the listing.
- However, since Snap has given back the gains, settling at $23.77 on Monday and at $21.44 on Tuesday, which tantamount to a loss of 10.7 percent from the listing price. However, the shares are still up about 26 percent from the offer price.
With Snap shares going under the opening price in under three sessions, Benzinga looked at how rival social media darlings such as Twitter Inc TWTR and Facebook Inc FB fared following their respective IPOs.
Facebook Took Time But Stayed Strong Eventually
Facebook IPO'ed on May 18, 2012, offering 421.23 million shares at a price of $38 per share. The company raised $16.007 billion through the offering. After opening at $42, a 10.5 percent gain over the offer price, the stock settled at $38.23 on its trading debut.
The stock took a while to trade back above its listing price. It was only on September 5, 2013, more than a year after its IPO, Facebook's shares reclaimed the levels hit on their listing. Facebook has not turned back since then and is currently at $130+ levels.
Twitter's Steady Retreat After Early Exuberance
Short-messaging platform Twitter, which went public on Nov. 7, 2013, closed its debut trading session at $44.9. The company offered 70 million shares at an offer price of $26. From the listing price of $45.1, the stock lost 0.44 percent on the first day, although it settled up a whopping 73 percent from its offer price.
In a month's time, the shares crossed back above its listing price. After peaking in December 2013, the stock tumbled to new lows around the summer of 2014. Gaining some traction, the stock was in a consolidation phase until April 2015, when it began a secular downtrend.
GoPro Didn't Click In Long Run
Meanwhile, GoPro Inc GPRO, although not belonging to the social media space, also had a much hyped entry into the public market. The high-performance wearable camera maker added 31 percent from its offer price of $24 and 9.4 percent from its listing price of $28.65 on its trading debut on June 26, 2014.
The shares consistently traded above the offer price for a protracted period and fell below the level only in November 2015. Subsequently, it has been a downhill journey, with the shares now trading at single digit levels, notably below its heydays, when it traded above the $90 level.
Investment Dollars In Snap Go Under Water
Coming back to Snap's IPO, a Reddit post noted that with the Snap shares now trading below its previous all-time low, all long positions opened anywhere in the previous three days were currently under water.
The post also dwelled on an updated paper published by Prof. Jay Ritter titled "Initial Public Offerings: Updated Status on Long-run Performance:" The post listed some highlights of the paper, which go as follows:
- Average first-day return is roughly 17.9 percent and therefore, flipping the shares at the end of the first day is a fairly sensible idea.
- However, average three-year buy-and-hold returns aren't great when adjusted for market returns over the same time period. This is reflective of valuation and business uncertainties, especially for smaller companies.
- The best market-adjusted three-year buy-and-hold returns on IPOs are for companies with considerable sales (above $1 billion) prior to going public. These companies also enjoy the smallest typical first day "pop" in valuation.
The third highlight may not augur well for Snap, as it reported revenues of $404.5 million for the fiscal year ended December 2016, although up notably from the previous year's $58.7 million.
A tweet by Tom Hearden, manager and senior trader at Skylands, confirms the loss of investment dollars, which were siphoned into SNAP in its early days of listing.
— Tom Hearden (@followtheh) March 7, 2017
Sell Side Circumspect
Sell-side analysts aren't too optimistic on SNAP either. The average analyst recommendation for the stock is Underperform, and the average analyst price target is $15.50, down about 28 percent from current levels. Pivotal Research, which was the first to initiate coverage of Snap post its IPO, has a Sell rating on the stock.
© 2017 Benzinga.com. Benzinga does not provide investment advice. All rights reserved