Snapchat beats expectations with its IPO but big challenges lie ahead

After weeks of speculation, Snap Inc, the

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owner of messaging app Snapchat, has gone public. Its shares were initially priced at US$17, with stocks jumping 44% to US$24.48 on the first day of trading. It brings the value of the business to US$28 billion, making it the biggest technology IPO since Alibaba made its debut in 2014 and reflects huge demand, considering the initial offering of shares was expected to be between US$14-16.

Many doubted that Snap Inc would achieve such a result. Its popularity is a given, but its ability to generate revenue is highly questionable (it is yet to turn a profit). Plus, we have become accustomed to the hype surrounding these “hot” tech IPOs and the question remains whether the valuation that investment banks come up with for these companies actually makes sense given their fundamentals – or lack of them. The valuation of high growth companies is intrinsically difficult and they are highly risky investments by their very nature.

https://theconversation.com/snapchat-beats-expectations-with-its-ipo-but-big-challenges-lie-ahead-73921