Snap Inc., the company that runs Snapchat enjoyed a successful IPO, watching its stock soar 44% in one day. Since then, it’s been on a steady decline and now rests below its initial price of $17.
While some would be happy if it just recovers back to its IPO price, others wonder whether it will ever see its first-day price again. Let’s look at the challenges they face, and the likelihood of future success.
The Company Behind Snapchat
Snap Inc. is the company that invented Snapchat, the social media app that has images and messages that disappear after they’ve been viewed. Just one little innovation set them apart from other services, much like the 140-character limit of Twitter brought on its success. And much like Twitter, Snap has seen early success on the stock market only to watch it dwindle away over time.
The Snap Inc. IPO
Snap Inc. caused a lot of excitement with their initial public offering, and were likened to social media services like Facebook and Twitter. This excitement caused the stock to rise from its initial price of $17 and close at $24.48 for its first day, the kind of swings seen all the time in penny stock investing.
What’s Gone Wrong?
The main problem being cited for why Snap Inc. hasn’t been able to continually rise since its debut on Wall Street is Facebook’s Instagram. In a story that is now nearly a legend, Snapchat’s creators Evan Spiegel and Bobby Murphy turned down and a $3 billion dollar offer from Mark Zuckerberg of Facebook.
After they snubbed Zuckerberg, Facebook bought Instagram and has been incorporating Snapchat features into it ever since. Snapchat is having a tough time separating itself from the competition because every new thing they come out with gets duplicated by their competitors.
Or it could be that Spiegel and other early investors just used the IPO to cash out huge amounts of money without a solid plan for the future. Many of the top executives as well as venture capitalists used the IPO to take out several million dollars in cash, so even if the stock never recovers they’ve at least made large fortunes for themselves.
The two founders of Snapchat are each worth over $3 billion dollars, so it seems wise that they turned down the offer from Facebook. But they’ll need the stock to get stronger if they want to have continued success and climb the ladder of the world’s richest people.
The Path to Recovery
The team behind Snap Inc. is not sitting idly by hoping things magically turn around, they are coming out with new products and coming up with new ideas to stay relevant and offer their users reasons to stay with their app.
One product is sunglasses that double as a camera that can take pictures and video and automatically upload them to Snapchat. Innovations like these that will show the way forward and all they need is one more killer app like their original idea and they’ll be set.
However, even with such a rocky start for Snap Inc., they’re still a larger company than Twitter at the time of this writing, although they’re just a fraction of the size of the ever-formidable and ever-expanding Facebook.