Snapchat is a business built in large part on disappearing messages and adding animated dog ears and flower crowns to users’ selfies.
As of Thursday, that business is worth about $34 billion — more than the market value of the old-line media company CBS, and about three times the size of another social media company, Twitter.
Snapchat has made paper billionaires of its 20-something founders five times over.
In making its stock market debut in spectacular fashion — its shares rising 44 percent on their first day of trading — Snapchat’s parent, Snap Inc., has blazed a trail for other technology darlings like Uber and Spotify that remain privately held. It elated Wall Street institutions eager for a prominent initial public offering when few had surfaced for months.
The company has entranced investors despite a litany of red flags, like enormous losses that are expected to persist for years, a slowdown in its once-vaunted user growth rates, and an ownership structure that gives Snapchat’s founders control for decades to come.
Then there are the shadows of onetime tech highfliers that have since crashed to earth. Twitter was valued at nearly $32 billion at the end of its first day of trading; Wall Street now values it at roughly $11 billion and has called for the company to sell itself. An earlier force in social media, Myspace, sold itself to Rupert Murdoch’s News Corporation for $580 million in 2005; six years later, it was sold to Justin Timberlake and other investors for $35 million.
Continue reading the main storySome analysts have already shown skepticism about the newest publicly traded tech giant. One, Brian Wieser of Pivotal Research Group, says the share price should be $10, far below the company’s offering price of $17, which itself was above the initial range predicted. Snap faces competition from larger companies and the challenge of a slow-growing user base, he said.
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Boosters of Snap’s prospects argue instead that Snap has the potential to become less like Twitter and more like its biggest rival, the $395 billion Facebook. These supporters point to some of the company’s obvious strengths: the 158 million people on average who used Snapchat each day by the end of 2016; the roughly 18 times a day that those users opened the app on average; the $404 million in sales that it collected last year, up from nothing three years ago.
For now, investors appeared to focus on the positive. Snap raised $3.4 billion in its market debut, the most by an American tech company since Facebook’s initial offering in 2012, according to data from Renaissance Capital. It was the first significant tech stock sale since at least December. And the 44 percent pop in its stock price was the biggest enjoyed by a company of a billion-dollar I.P.O. since Twitter’s debut in 2013. More than 217 million shares traded on Thursday, as some investors bought and others cashed in, exceeding the number of shares Snap sold in the I.P.O.
For investors in other still-private unicorns — a term for start-ups valued at more than $1 billion — the immense success of Snap’s deal highlights the appetite for a tech darling, even if the company still bleeds money. Count Uber, Spotify and Airbnb within that group.
“The sound you’re hearing today after the Snap I.P.O. is the happy snapping of fingers of money-losing unicorns and their investors,” said Kathleen Smith, a principal at Renaissance Capital. “It looks like Snap has set the path to monetization.”
In countless meetings during a two-week roadshow with investors, Snap executives sought to rebut some of the biggest concerns about the company’s prospects. Slowing growth toward the end of last year stemmed from problems with the service’s Android app. Competition from Facebook, which openly copied some of Snapchat’s signature features at Instagram, would do little to dent user enthusiasm.
And the company would continue to press innovations, such as the branded lens filters that transform users into monsters, fairies or Taco Bell tacos, and that have become new forms of advertising beloved by brands. Potential new ideas include drones and 360-degree cameras.
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From AOL to Snapchat
Major I.P.O.s of Internet technology company since AOL in 1992.
By Wednesday night, Snap’s bankers had drawn up their list of the investors who would get the first shares, largely big mutual funds and some hedge funds, all with the aim of picking firms that are most likely to stick around for the long term. The I.P.O. minted wealth for others that invested when it was a younger company, including big venture capital firms like Benchmark Capital and a high school in the Bay Area.
Unlike newly public companies that seek to celebrate their first day of trading on the stock markets, Snap kept its festivities largely confined to the New York Stock Exchange. The company’s top executives and board members gathered there for a closed-door breakfast, where guests were presented with pins in the shape of Snapchat’s ghost mascot.
Evan Spiegel, 26, and Bobby Murphy, 28, Snap’s founders, briefly addressed the crowd, uncharacteristically clad in suits and ties rather than their customary T-shirts. They also presented exchange officials with their version of the customary gift given by market debutants: one of the vending machines that sell the company’s Spectacles, camera-equipped sunglasses that send 10-second videos to the app. (The machine won’t be refilled once it sells out of Spectacles.)
Then the founders walked through the floor of an exchange bedecked in the company’s signature yellow — the color splayed on electronic boards, wrapped around water bottles and leaping off some executives’ ties. One Snap employee had ducked into the Hermès store down the street to pick up a yellow tie days before just for the occasion.
Mr. Spiegel’s fiancée, the supermodel Miranda Kerr, enthusiastically documented the day on her own Snapchat Story and posed for selfies. Attendees on the floor could unlock a special filter that placed the company’s ghost mascot in their videos, holding virtual Snapchat balloons and ejecting a rainbow from its mouth.
At 9:30 a.m., Mr. Spiegel and Mr. Murphy rang the Big Board’s opening bell and then briefly basked in the adulation. Snap’s chief strategy officer, Imran Khan, escorted his family around the exchange and posed for pictures with fellow employees.
But by the time Snap’s shares opened for trading at $24 each — which was later in the morning — the company’s top executives had disappeared from the floor, heading to the nearby offices of one of the banks involved in the public offering, Goldman Sachs, to watch the opening. Then many staff members trekked to Snap’s Midtown Manhattan offices to head back to work.
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