Snapchat shares snap back after results shock
Firm reports heavy losses but investors are more worried about user numbers
Social media upstart Snapchat has snapped back to earth with a bang after results show huge losses last year and disappointing user growth.
In early March, the company listed at $17 a share and was valued at $24bn (£19bn). But the stock has traded up as high as $28bn (£22bn) over the past month.
After plunging in after-hours trading last night, shares opened in New York this afternoon at $18.30, more than 20 per cent down on previous figures.
This gives Snapchat a valuation of $21bn (£16bn). This means it's worth more than the $13bn (£10bn) price tag for embattled Twitter, but the figure is just a twentieth of Facebook's monster $435bn (£338bn) market capitalisation.
Snapchat has reported losses of $2.2bn (£1.7bn) last year.
Some $1.7bn (£1.3bn) of this relates to bonuses paid out to staff related to the listing, says The Guardian, but this leaves hefty structural losses of $200m (£155m).
Losses are not uncommon for social media companies in the early years –Twitter is still in the red and it took Facebook six years to turn its first profit – but Snapchat's performance wasunderwhelming in other regards.
Its user growth is 36 per cent, which is down from 48 per cent last year.
With its relatively low base – 166 million daily users compared to Facebook's 1.3 billion – investors are concerned that Snapchat's growth rate appears to be slowing down already.
Investors are anxious that this drop is a reflection of Facebook's habit of "relentlessly" going after the same audience as Snapchat by "cloning" features. This could curb further growth, says the Daily Telegraph.
"One bright spot in its [Snapchat's] earnings was a 286 per cent increase in revenues," says the Telegraph, "as the company's advertising operation grew rapidly… [to] $149.6m in the first quarter of 2017, up from $38.8m a year ago."
Snapchat valued at £19bn as it floats in US
The social network Snapchat made its debut on the New York Stock Exchange (NYSE) today, with a valuation of $24bn (£19bn).
The opening share price of $17 (£13.84) for owner Snap Inc means the firm is worth considerably more than anticipated. Analysts had expected a price of $14 to $16 per share.
It's a valuation that puts Snap far ahead of Twitter, which is worth around $11bn (£9bn), but a long way behind Facebook, which is valued at $395bn (£321bn), Sky News points out.
The massive valuation for an app that allows teenagers to plant virtual bunny ears on each other's heads reflects Facebook's declining popularity with younger web users – but the world's biggest social network is fighting back.
Facebook subsidiary Instagram recently produced its own version of one of Snapchat's key features, Stories, causing the upstart's growth to slow considerably, Sky says.
The challenge now for Snap is to keep the interest of its easily-bored demographic of teens and twenty-somethings. The app added 36 million daily active users in the first half of last year – but just 15 million in the second half, says Sky.
In fact, Snapchat's success is predicated on obsolescence. Rather than hanging around to haunt the user potentially for decades as Facebook posts and photographs do, contributions to Snapchat disappear a few seconds later (though some posts last for 24 hours).
The strategy of impermanence has paid off. The app has an estimated 158 million users every day.
Investors will be opening the bubbly today as the flotation makes them instantly wealthy, says Sky. Snapchat co-founder Evan Spiegel, who is 26, secured a 17 per cent stake worth an eye-watering $4bn (£3.26bn).
"Just six years ago," says CNN money, "Spiegel was working on a failed start-up called Future Freshman, which he later said was used by "no one … except my mom". Less than three years ago he was still living with his dad.
In 2013, Spiegel was widely rumoured to have turned down an offer from Facebook to buy Snapchat for $3bn (£2.4bn). Now his stake alone is worth more than that.