Snap, biggest tech IPO since Alibaba, prices above forecast

LOS ANGELES — Snap, Inc., the parent company of the communications app Snapchat, priced its shares at $17 each Wednesday, in the biggest U.S. tech listing in more than two years.

The price was above the $14-$16 range it set two weeks ago, a sign of strong demand. The Venice, Calif. company said it was selling 200 million shares, raising $3.4 billion from the IPO.

The offering makes it the largest U.S. tech IPO since Alibaba raised $25 billion in 2014, and the largest for a U.S.-based tech company since Facebook's $16 billion offering in 2012, according to Dealogic.

Snap shares are set to start trading on the New York Stock Exchange under the ticker SNAP Thursday.

The IPO is unusual in that investors aren't granted voting rights, with Reuters calls "an unprecedented feature that has raised concerns among corporate governance leaders that other high-valuation companies may follow suit and leave investors with little say over company operations."

The price values Snap at a little under $24 billion, around the valuation of Google at the time of its IPO but far smaller than Facebook, which was valued at over $81 billion when it debuted, according Dealogic.

"The IPO market hasn’t had a deal like this in over two years," notes Matt Kennedy, an analyst with Renaissance Capital. "If you're a tech investor, you haven't had anything to look at in awhile."

Any new tech IPO would receive lots of attention, he notes, and while "there are many questions" about Snap's future—i.e., its ability to turn a profit—the company "has many things going for them," Kennedy says. He points to a huge user base of over 158 million daily active users who spend lots of time on the app.

"Investors have shifted to placing the premium on growth and Snap is capitalizing on that," he says.

Mike Loewengart, the vice-president of investment strategy for online broker E*TRADE, suggests that investors take a step back before jumping in.

"Investors are wise to let the hype cool once it hits the public markets," he says. "While highly anticipated IPOs of this magnitude may be tempting to jump in immediately, historically many IPOs—particularly social media companies—often need time and room to acclimate to the rigors of being a public company."

The huge Snap IPO is expected to usher in a revitalized market this year, encouraging IPO debuts by other name tech startups.

Macroeconomic and geopolitical turmoil that roiled markets last year are expected to yield to an exuberant market trading at record highs and a stream of high-profile companies in the IPO pipeline in 2017.  Among the possible candidates: Hootsuite, Dropbox and Spotify.

"Snap will be a jolt to the tech IPO market," says Angelo Zino, an analyst at CFRA Research.

The tech IPO market is poised for a comeback in 2017 after a dismal 2016 — the worst worldwide this decade. Last year, only 53 tech companies raised $8.7 billion in initial public offerings, down 42% and 68%, respectively, from 2015, according to PricewaterhouseCoopers.

USA TODAY


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