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Snapchat’s IPO is having a large effect on younger investors, for better or worse

(BUSINESS NEWS) The stock market is a tricky system, especially when you’re new to the system. As Snapchat went public, many younger investors bought in and are now feeling it.

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Young bloods are learning the hard way

Snapchat’s decision to go public in March attracted several thousand new clients to trading platform TD Ameritrade, and the average age of these users is nearly a decade below the overall average age of their users, according to a report from CNBC That’s some proven truth to the fact that people like to invest in companies that they like and trust.

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Unfortunately, that’s not always the best ways to invest your money.

Big loss, big flag

In their first quarter of this year, Snapchat reported a 2.2 billion dollar net loss. In the world of the stock market, where profits win the day, that’s a really big red flag. And the market responded accordingly; shares dropped 23 percent in value.

Furthermore, younger investors are now souring on the stock.

The same CNBC reporter quoted an employee from Robinhood, a trading app that attracts a younger demographic, as saying that “users were selling more Snap shares than buying over the last several weeks.”

History repeating

Snapchat’s stock value drop isn’t new. On average, Facebook and Twitter’s stock lost 14 percent of its value in the days immediately following their IPOs. This is a valuable learning opportunity for new investors.

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Buying low and selling high can help you stay ahead.

Case in point: since falling off a cliff on May 11, Snapchat’s stock climbed from almost 18 dollars a share to 20.75 dollars a share at May 15th’s market opening.

Taking advantage of market corrections, combined with a little bit of patience, is the best way to earn a strong ROI on your stock market investments.

In Snapchat’s case, two line items are causing concern from investors and analysts. The first stems from large losses reported due to compensation spending. The clear majority of Snapchat’s reported $2.2 billion loss comes from paying out stock-based compensation. This should be a one-time issue.

Room to grow

The pervading issue going forward will be generating more value from Snapchat users. In the earnings, Snapchat reported $150 million in revenue; however, at 166 million daily active users, the value of each users is less than a dollar.

For comparison, the worldwide average value of a Facebook user was $3.73 per quarter. In a competitive social media landscape, Snapchat has lots of ground to make up in this arena.

#SnapStock

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Written By

Born in Boston and raised in California, Connor arrived in Texas for college and was (lovingly) ensnared by southern hospitality and copious helpings of queso. As an SEO professional, he lives and breathes online marketing and its impact on businesses. His loves include disc-related sports, a pint of a top-notch craft beer, historical non-fiction novels, and Austin's live music scene.

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  1. Pingback: Snap stock is back at IPO price, is this a warning sign? - The American Genius

  2. Pingback: Snapchat's new mapping feature is more than just a fun toy #relevant - The American Genius

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