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Snap falls to IPO price

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Re: Snap falls to IPO price

#151

Post by daveFNbuck »

nickrivadeneira wrote: post #75
dna_polymerase wrote: post #37

Earlier quoted context omitted.

Facebook grew so much, almost everyone has it and its use cases are versatile (and therefore the data collected). Snapchat is really just used by younger folks with almost no financial power for chatting in the weirdest way.

Anecdotal: I, and a large chunk of my friends and acquaintances use snapchat regularly. We're 30 year olds making good money. In the same way that some messages are best suited for a text message, some for an email, and some for a phone call, there are some messages where snapchat is the best medium.

For what kinds of messages is snapchat the best medium? I've tried using it but can't understand its purpose.

Re: Snap falls to IPO price

#152

Post by tristanj »

dgudkov wrote: post #146
tristanj wrote: post #112

Earlier quoted context omitted.

From an investors standpoint, I view Facebook as four companies -Facebook, 2 billion MAU -Messenger, 1.2 billion MAU -WhatsApp, 1.2 billion MAU -Instagram, 700 million MAU Messenger, on its own, is easily a $50 billion company.

I'd like to hear what revenue (yet alone profit) Messenger has on its own that can justify a $50Bn price tag.

None revenue, just users. Based off their MAUs, if Messenger was an independent chat app they would fetch such valuation. I peg them at $40/user, which isn't so crazy considering WhatsApp was purchased at $35/user and Instagram at $30/user. When Facebook Messenger gets around to copying WeChat (the whole payments and official accounts ecosystem) I expect them to rake in merchant fees for big profit.

WhatsApp presently has none revenue either.

Re: Snap falls to IPO price

#153

Post by chimeracoder »

nikanj wrote: post #147
chimeracoder wrote: post #100

Earlier quoted context omitted.

> "Well-established protocols" can result in IPO prices being systematically set too low. Yes, theoretically a bank should be able to break the ranks, but all they would get for their trouble is smaller profits, and a potential lawsuit from investors. After all, they did diverse from the "established accounting standards" when pushing the IPO price up. Assuming a roughly competitive market with n players that do not…

Not sure how you'd get that (n+1) business off the ground. Even with the current happy-go-lucky funding climate, I don't see much success in pitching the idea. "We'll take on the giant incumbents, by accepting additional risk on behalf of our clients, in return of reduced profits". I agree that there would be a solid market demand for this company. The same way there would be much demand for a telecom/isp that provid…

> Not sure how you'd get that (n+1) business off the ground. Even with the current happy-go-lucky funding climate, I don't see much success in pitching the idea.

This is a thought experiment, designed to illustrate that auctions (which IPOs are - an auction between underwriting banks) converge towards the maximum price that individual participants would be willing to pay. You can easily extend this logic to any individual participant.

> in return of reduced profits

You keep saying "reduced profits". If you seriously believe that banks are artificially keeping bids low, then there would be no reduced profits - any individual bank willing to outbid the rest consistently would completely sweep the entire market, capturing all profits across the market of banks which underwrite IPOs.

Of course, this won't happen, because banks aren't artificially keeping bids low, which is the whole point. You can't just point at the fact that post-opening bell prices are greater than IPO prices to show that banks are colluding with each other, because that doesn't prove anything. The current prices are completely consistent with a competitive market.

Re: Snap falls to IPO price

#154

Post by gdilla »

daveFNbuck wrote: post #151
nickrivadeneira wrote: post #75

Earlier quoted context omitted.

Anecdotal: I, and a large chunk of my friends and acquaintances use snapchat regularly. We're 30 year olds making good money. In the same way that some messages are best suited for a text message, some for an email, and some for a phone call, there are some messages where snapchat is the best medium.

For what kinds of messages is snapchat the best medium? I've tried using it but can't understand its purpose.

that's not the appeal. Snapchat is coveted by it's users because of ephemerality. It grew in reaction to your parents being on fb; in reaction to public, permanent social communication. The users love it because they think it's more authentic - that they're not rehearsing for a contrived selfie or food porn. It's cool cuz they're shooting the shit and not going for likes, and no one outside their sphere is gonna see it.

Re: Snap falls to IPO price

#155

Post by Rjevski »

I can't understand what are they doing to not make any profits. They are selling ads. Server resources to exchange the pictures are a minor cost, so where is all that ad money going to?

If they stopped wasting money on development time making their UX even worse, or stupid stuff like Spectacles, or this: https://www.recode.net/2017/6/17/15824222/snapchat-ferris-wh... - maybe they would actually be making profits right now.

Re: Snap falls to IPO price

#156

Post by chimeracoder »

davidw wrote: post #142
s73ver wrote: post #132

Earlier quoted context omitted.

Isn't that how just about everything is sold? My box of Cheerios isn't auctioned off; they picked a price. They had several factors that went into picking that price, just like those that set up the IPOs have.

The pricing of Cheerios doesn't seem to suffer from the principle-agent problem, though. No one but consumers really 'wins' if cheerios are underpriced. And to my knowledge they don't continue to be traded once they're bought, either, so it's sort of apples to oranges.

> The pricing of Cheerios doesn't seem to suffer from the principle-agent problem, though. No one but consumers really 'wins' if cheerios are underpriced

This is not an example of a principal-agent problem. There are two competitive markets: the competitive auction between underwriting banks, and the competitive market between public traders. The price between these two differs because the underwriting banks assume a great deal of risk in the process - risk which otherwise would be borne by the company.

> And to my knowledge they don't continue to be traded once they're bought, either, so it's sort of apples to oranges.

Breakfast cereals are definitely sold wholesale by third-party suppliers (as are apples and oranges as well).

Re: Snap falls to IPO price

#157

Post by qq66 »

acchow wrote: post #54
jacquesm wrote: post #32

Earlier quoted context omitted.

That would stop the issuers from making a bundle on just about every IPO and we can't have that now, can we?

So this is pretty lazy anti-intellectualism. Can you provide some evidence that the investment banks are colluding on IPO pricing?

I was an intern at a Wall Street investment bank in 2004 and I remember the unbridled anger that animated any senior banker who started talking about Google and their efforts to "cut out the Street." It's not "collusion." It's simply that Wall Street banks are the ones with access to mutual funds and other buy-side investors, not tech companies. The bankers work with those investors every day, the tech companies once in their history. The behavior is enabled by what in Silicon Valley would be called a "moat."

Re: Snap falls to IPO price

#158

Post by olegkikin »

Rjevski wrote: post #155

I can't understand what are they doing to not make any profits. They are selling ads. Server resources to exchange the pictures are a minor cost, so where is all that ad money going to? If they stopped wasting money on development time making their UX even worse, or stupid stuff like Spectacles, or this: https://www.recode.net/2017/6/17/15824222/snapchat-ferris-wh... - maybe they would actually be making profits righ…

They have 1-5K employees. Even if you take a median salary of $40K, that's $40-200M/year. That's just the salaries with no taxes/overhead and no consideration that IT salaries are generally much higher.

Re: Snap falls to IPO price

#159

Post by _eht »

beager wrote: post #8

What does $SNAP need to do to deliver on the hype? Is there anything that can make $SNAP a good investment for anyone other than the parties involved in trading the IPO? I tend to be bearish on $SNAP in general, but I'm interested in the discussion. How do they right the ship and boost back up to that $25-30 range? What's their play?

Found the CEO.

Re: Snap falls to IPO price

#160

Post by tunetine »

bdcravens wrote: post #23
skywhopper wrote: post #7

As skeptical as I am that Snap will ever be a moneymaker, this data point is not meaningful in any way. Facebook traded below (often _well_ below) its IPO price for the first 15 months on the market.

I don't think the two are equivalent however.

Facebook's IPO was botched which caused a pretty big slide the day of the offering. The next two weeks it continued to go further below IPO price to -50%. Quarter after quarter analysts questioned if they could maintain growth and profits.
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