Snapchat floats on NYSE, shares jump 40pc

A banner for Snap Inc. hangs from the front of the New York Stock Exchange. Photo / AP

Snap, the parent company of Snapchat, has floated on the New York Stock Exchange in one of the biggest tech listing in years.

The company has raised US$3.4 billion at US$17 a share after pricing its initial public offering (IPO) last night. This makes it the biggest tech float since 2014, when Alibaba shattered all records.

Its opening price on Thursday was set at up around US$24 a share - valuing it at over US$30b. It also made its two founders, Evan Spiegel and Bobby Murphy, worth more than US$5b each.

John Spiegel, centre top, and Melissa Ann Thomas, centre foreground, parents of Snap Inc. CEO Evan Spiegel, applaud during the opening bell ceremony. Photo / AP

Snap is a favourite of teenagers and millennials, but its public filings show that the company is heavily lossmaking. In the run-up to the IPO, it has had to convince potential investors that it is not like Twitter, which also floated amid massive optimism but has struggled since then.

Snap began trading this afternoon at US$24 a share - a jump of 40 per cent from its pricing of US$17 a share.

Spiegel and Murphy are both young, aged 26 and 28 respectively.

A photo shared on Twitter from Spiegel signing the Distinguished Guests book at the New York Stock Exchange revealed Spiegel's signature includes the Snapchat ghost logo.

Both are selling more than US$250m worth of shares in the IPO, but will keep hold of 211 million. At US$24 a share, that puts both of their net worths above US$5b.

Snapchat, Snap's main service, has a loyal user base of 158 million people who use it to send 2.5 billion messages every day, according to its initial public offering filing. While it has yet to profit off that popularity, it is growing its revenue, which was $US404.5m in 2016. The firm has invested substantially in working with media partners - including The Washington Post - to deliver news and analysis to its predominately young audience.

The company's growth has been largely driven by younger users, who spend over 30 minutes on it per day, according to the company's filing.

Snapchat's growth, however, is being driven more and more by older users, according to the research firm eMarketer. The firm projects that 6.4 percent of Snapchat's users this year will be between 45 and 54, showing that it's expanding its appeal among older users - even as fewer younger users join the network.

But some analysts still caution that Snap has to prove itself. James Gellert, chief executive of the analysis firm Rapid Ratings, expected Snap to crackle with a post-IPO pop, thanks to tech-focused investors hungry to get their hands on something new. But, he said, Snap has a way to go to prove itself as a stable investment.

"Snap is relatively young and it's yet to generate profits. The typical IPO tech investor will say that's fine and it doesn't matter," he said. But from a long-term perspective, Gellert said, being able to demonstrate the ability to generate profit and make money on assets is key for a company's financial health.

Snap also runs some risk of getting the wind taken out of its sails by competitors. Facebook - which famously tried to buy Snap (then Snapchat) for US$3b in 2013 - has introduced some Snapchat-like features to it's Instagram social network.

According to analysis from the analysis firm 7Park Data suggests that the launch of Instagram Stories - a feature very similar to Snapchat's Story product - hurt Snapchat's growth. Snapchat's daily users fell off after Instagram introduced its version Stories, indicating that Snapchat's user base can be lured away.

- with Washington Post