Snap IPO is so 1999

<p>The owner of disappearing message app Snapchat is enjoying a market debut that follows the playbook almost to the letter.</p>

The owner of disappearing message app Snapchat is enjoying a market debut that follows the playbook almost to the letter.

At Wednesday night’s oversubscribed IPO (where demand outstripped availability by 10 times) the stock priced at $17, well above the $14-$16 indicative range. In frantic trading that is finally underway as I write (after a customarily prolonged maiden auction) shares are changing hands slightly above $25. Thomson Reuters’ blended order tracking reveals a smattering of even higher bids. Demand is not a problem, right now.

Snap’s other similarities to the deluge of tech IPOs at the cusp of ‘ bust’ are also now well known—not all are disreputable. Take your pick from an absence of profitability vs. escalating sales (up sevenfold to $405m in 2016); galloping costs against decelerating usage (average daily user growth down to 3% at the end of 2016) or Snapchat’s intriguing niche (86% of users under 35) vs. arrogant flotation terms (like the notorious lack of voting stock).

More than one seasoned portfolio manager has publicly noted that Snap’s launch into a frothy market has an uncomfortable likeness to a harbinger of correction.

The probability that Snap will disappear in a puff of yellow smoke admittedly looks slim. But with a cash burn rate of $1bn in two years, a popular but loss-making product and a 26-year old CEO, investors do seem to be bidding up the price of a bumpy ride, at best.

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