I’ve been seeing story after story about how Snap (NYSE:SNAP) is now below its IPO price. Huge publications are making hay out of this big event, with headlines such as this:
Now, there’s no reason to single out TechCrunch in particular, but I’ll do it all the same. As you can see, I’ve highlighted a particular sentence that seems to assert, now that the closing price is below the IPO price (by all of a penny) that public investors lost money on this. In other words, since it came public at $17, and has been trading above it ever since, everyone has been just fine and dandy until now.
But why does the business press continue to press forward this canard that the “public” all bought in at the IPO price?
Let’s take the chart of SNAP as the obvious example. Here’s the chart of its entire life as a public firm:
Let me be clear: the IPO price doesn’t necessarily have ANYTHING to do with what the public pays.
The first public investors in SNAP paid $24 per share, not $17. That was the opening price on its first day of trade. The investment banks were delighted, of course, because they were, in fact, the ones who enjoyed the $17 price (a little less, but we’ll keep this simple) and got to sell it to the public for whatever the public was willing to pay.
So SNAP had a good first day (high of $26.05) and a good second day (high of $29.44).
And that, my friends, was the end of the SNAP success story. From then on, it lost momentum and has since lost nearly HALF its value in a little over four months.
So since the SECOND DAY of the company’s public existence, this company has been a money loser for “investors.” The losing didn’t start just today. It started almost immediately after the public offering. And yet the web is littered with ludicrous nonsense like this:
The “return from IPO” was never 60% (except for the investment bankers). We’re talking about the PUBLIC here, right? The greatest return was actually 25% for the lucky few who bought at the open and sold at exactly the next day’s high.
My own view is that SNAP is heading for single digits and it might not even exist as a public entity in a couple of years. I was very ambivalent about SNAP at first, but once I saw its cover story in Time in March, I knew Snap was doomed.