Snap – Netscape On Steroids?

By Shlomo Maital

snap

On August 1995, Wall St. witnessed a near-miracle.   A company called Netscape Communications, maker of the first widely-used Internet browser (given away for free) did an initial public offering of its shares.

     Here is what happened: “The stock was set to be offered at US$14 per share, but a last-minute decision doubled the initial offering to US$28 per share. The stock’s value soared to US$75 during the first day of trading, nearly a record for first-day gain. The stock closed at US$58.25, which gave Netscape a market value of US$2.9 billion.”

     That defying-gravity IPO showed Wall St. it had a sure-fire way to print money – issue shares of dot.com companies, and watch the manic rise print profits for insiders. The bubble burst in 2000/1, and then came a bigger collapse, in 2007/8.  

   Fast forward to the remarkable IPO of Snap Inc. (Snapchat, photo messaging company).

   “Snap shares closed their first day of trading up 44 percent at $24.48 a share, quenching a long drought in the market for tech IPOs.  More than 200 million shares — the entire size of the offering — changed hands over the course of the day, accounting for roughly 10 percent of the total volume of trading on the New York Stock Exchange on Thursday. The stock opened shortly before 11:20 a.m. on Thursday in New York, and started trading at $24 a share, rising 41.2 percent from its pricing at the open. The company, trading under the ticker SNAP, priced its public offering at $17 a share on Wednesday.  Share prices rose as high as $26.05,  and fell as low as $23.50.  The opening price of $24 puts the company’s market capitalization at about $33 billion, about the size of Marriot and Target. Twitter’s market cap is about 11 billion, while Facebook’s is about $395 billion. The young ephemeral photo messaging company posted a $515 million loss last year. “

So, a company that lost over half a billion dollars last year is valued by the market at $33 b., equal to the valuation of a huge hotel chain, profitable, or a huge retail chain, also highly profitable.

     Here we go again.