Snap IPO is so 1999

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

The owner of disappearing message app Snapchat is enjoying a market debut that follows the dot.com 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 ‘dot.com 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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