Snap Inc., the parent company of Snapchat, had a stellar first day in its public debut on the New York Stock Exchange, popping 44%. The self-proclaimed camera company that began its roots as an ephemeral photo-sharing app first priced its IPO at $17 per share on Wednesday. The stock opened at $24 and closed the day at $24.51. The company’s market cap is being reported as $34 billion (fully diluted).
The public markets have valued a niche company with no profits and a not-so-loyal userbase at 34 Billion. Can we expect more tech companies to go public to cash in on the trend?
How many other companies with similar performance are as big of a household name? Don't get me wrong I am not a big fan of Snapchat by a long shot, but I at least heard of it. When every app developer starts getting massive valuations then it is time to be concerned. Maybe it is time to bring back pets.com?
The trend of tech companies that don't make money going public with high valuations started years ago.
The trend of public markets not caring about voting rights started with the Snap IPO.
To answer your question: yes and no
Yes, because Snap showed that even a tech company with profitability far far out, and arguably ridiculous valuation, can be successful. So Snap definitely helps those companies that are in a better state but still unsure whether to go, essentially making them more comfortable that their is a receptive IPO market for high-growth tech firms.
No, because to some extent there was already a pipeline of companies that are queued up to go no matter what happens to snap. Sure if it would have done terribly it would have been a bit of a hamper for a little bit, but ultimately, if the story of the company is cohesive and compelling, and the valuation is attractive, investors will flock to it.
As for specific examples: right now as I write this, we have MUlesoft on the calendar (MULE), though nobody has probably heard of them in regular people circles, it will definitely ring a bell to people familiar with the tech space. On a more high profile level, Spotify is a likely candidate, mainly because they have ratchets on their debt that makes it costly for them to delay and IPO for much longer (though they are having issues with royalty payments making the gross margin look pretty anemic).
Presidio didn't do so hot today
Problem with presidio was concerns about organic growth. Margins were fine but historical growth looked like it was only faster than the market because of acquisitions. Plus the valuation was a premium to all the comps apart from CDW (probably best operator in the space)
I bet some companies like Facebook and rake in some $$ from government contracts.
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