Companies go public all of the time and as a result their stocks do funny things.
As of Thursday, June 15, the stock price of Snap Inc, the instant messaging and video company behind Snapchat, Bitmoji and various other social media crazes, had dropped to its IPO price of $17.
Rundown in a snap
Snap went public on March 2 and saw a fast surge of interest, rising from that initial $17 to a peak of $29.44 within 24 hours. Since then, Snap has struggled, reporting slowed growth in revenue and user adoption, and its stock price has predictably fallen.
The struggles of Snap and other new tech IPOs have raised concerns that this may be a repeatable model: initial spike, slow downward spiral.
Those concerns get extra concerning given major tech IPOs in the offing: Altice USA, the American arm of the multibillion-dollar Luxembourg based telecom, is expected to make a 46.5 million share, $27-31 initial offer this week, and the Blue Apron meal service will be making a public offering soon as well.
Investor trepidation based on the struggles of Snap and other unique technology IPOs one investor called “tech unicorns” may well represent an obstacle for those companies and others.
It may also be overstated. Facebook dropped below its IPO price before stabilizing. So did Amazon. More importantly, no company comes to the marketplace with a sure bet that it’s the next Amazon or Facebook, and if there’s a yardstick that works regarding long-term success in the tech sector, it’s not “has it ever dropped below its IPO price?”
A better bet, as usual, is the classic “what’s the offer?”
Troubled tech IPOs like Snap, FitBit and Box have suffered less because of vagaries of the market than because they haven’t managed to make a complete, convincing offer to investors.
It is the nature of tech companies that can change at any time, because tech invests in the future.
In the grim darkness of 1998, Apple traded at $7 a share.
Then the iPod happened. You may have heard of it.
beating the odds
The trouble isn’t “tech unicorns,” because it’s not tech. The trouble is one-trick ponies – companies that can’t diversify or find a user base beyond what existed before their initial offering.
The question for Snap, and for other troubled stocks, tech or otherwise, is whether they can beat those odds. Plenty do. Ask Josh Buckingham.