Coverage: Snapchat to begin trading after pricing IPO above range

Social media company Snap Inc. will begin trading Thursday morning after it priced its initial public offering at $17 per share, valuing the five-year-old company at $24 billion.

Paresh Dave of the Los Angeles Times had the news:

Snap Inc.’s IPO is the most lucrative in the U.S. since online shopping company Alibaba raised $22 billion in 2014 and the biggest for a tech company since Facebook’s $16-billion haul in 2012. Facebook and Visa are the only California companies that brought in more cash than Snap through an IPO, according to FactSet data.

Mutual funds, pension offices and other investors paid $17 per share to be the first to hold Snap stock when it begins trading — if all goes as planned — on the New York Stock Exchange early Thursday under the symbol SNAP.

The company offered up about 15% of its outstanding shares and contemplated higher prices after receiving 10 times the demand as supply, according to a source familiar with the deal not authorized to comment on private discussions.

But Snap decided to leave money on the table. Starting slightly lower could ensure that prices climb in Thursday’s trading because strong first-day increases are often viewed as a positive sign. And a lower price helped court preferred investors — ones likely to hold onto shares for longer terms.

Rachael Levy and Alexei Oreskovic of Business Insider looked at how the stock might perform Thursday:

But fundamentals may not matter much at a time when internet IPOs have been scarce and the overall market is at historic highs.

“Would I be surprised to see it double on the first day? Absolutely not,” said one fund manager who believes the stock is actually overpriced but could benefit from strong sentiment in the short term.

“Investors know they’re buying it at an insane valuation, but you’re counting on the tape driving it higher,” he said.

Eric Jackson, a hedge fund manager who is in the process of starting a new fund, says he wouldn’t be surprised to see Snap’s stock finish its first day in the low $20s, suggesting up to a 40% pop from the $17 IPO price.

Michael J. de la Merced of the New York Times reports that other tech unicorns may soon go public due to Snap’s success:

Investors, attracted by Snapchat’s hold on its millennial users — who check the app on average more than 18 times a day — flocked to the initial public offering, pushing the parent company, Snap Inc., to a valuation of nearly $24 billion.

The stock sale sets Snap up as the most valuable American technology company to go public since Facebook nearly five years ago. And it may herald a coming wave of unicorns — technology start-ups valued at more than $1 billion by private investors — that are expected to hit the public markets in the next few years.

Snap’s offering was priced on Wednesday at $17 a share — a dollar more than the previously expected pricing range. The pricing came on a day when the stock market surged to another high, fed by raised expectations of tax cuts, looser regulations and higher interest rates under the Trump administration. Shares of the social media companies Facebook and Twitter also rose.

Those buying into Snap’s offering did so even as warning signs have flashed over the company, based in California. It lost more than $500 million last year, and its explosive user growth appears to have hit a speed bump. And in a decision that has angered some large investors, the shares will have no voting rights, leaving control in the hands of the company’s founders, who can retain that power for years even after leaving Snap.