Isn't this what happened with FB as well?
The biggest two:
1) FB dropped on opening day itself, which was actually great for Facebook (the company), but not so great for the Morgan Stanley bankers who were underwriting the IPO. They overestimated the price that retail investors would want to pay, so they overpaid Facebook for the shares.
2) SNAP is issuing only Class A shares, which are non-voting. Some other companies have segregated classes of shares with different voting rights, but according to SNAP's own S-1, they are the first company to have an IPO with only non-voting shares available.
Combine that with the fact that they have no plans to make a profit[0] or to issue any dividends[0][2], and that means that the appeal to investors is very limited: they have no way to influence company decisions, and no way to participate in profits from the company. Those are usually the two biggest contributors to the fundamental value of a stock.
[0] this is not my opinion; this is a direct quotation from their S-1: "We have incurred operating losses in the past, expect to incur operating losses in the future, and may never achieve or maintain profitability."
[1] Again, directly from their S-1: "We do not intend to pay cash dividends for the foreseeable future."
[1] https://www.sec.gov/Archives/edgar/data/1564408/000119312517...
To me this shows the cynicism inherent in the entire stock market system. We're all just trading on the popularity and good will of these companies, and they know it.
If not I can't see how Snaps stock could be worth anything at all. It was just free money for them from the IPO without any obligations to the new "owners".
Other than that getting IPO price correct is very complex for companies without a history of profits. However, any price greater than zero is still useful.
They do not have plans to make a profit. They have plans to do things, and those things may, in the future, generate a profit, but they have not committed to any concrete timeline for generating a profit or set any estimated targets for profitability, which I think can be reasonably summarized in a colloquial context by "no plans to make a profit".
> [1] Again, directly from their S-1: "We do not intend to pay cash dividends for the foreseeable future."
That's not one of the differences between FB and SNAP, the same risk is listed in Facebook's S-1 (only the word "cash" is missing).
I didn't say that was a difference - I said that their plans not to issue dividends combined with their unique voting structure was significant.
That disclaimer means something completely different when you're talking about a company that is issuing stock with voting rights (even when the CEO has majority ownership), as opposed to a company in which the stock carries literally no voting rights.
> [1] Again, directly from their S-1: "We do not intend to pay cash dividends for the foreseeable future."
FWIW this is a negative spin on the statements. The first [0] statement sounds like a standard warning, and the second [1] specifically calls out cash dividends, not profits. FB has not paid any cash dividends, neither has Google, but both have large profits. It's uncommon for tech companies to pay cash dividends. Apple and Microsoft do it (both very old companies), but few others do.
The difference is that people can purchase shares in Facebook and Google that give them voting rights. That is not true for Snapchat.
The fact that Snapchat isn't giving dividends today isn't notable per se, but the fact that it's not giving dividends and investors have no mechanism to influence the company's direction (which includes pressuring them to provide dividends in the future) is literally unprecedented.
Market premium on GOOGL (voting shares) is 2.4% as of this writing, FWIW.
It's possible for disagreement to exist between the founders, requiring a majority coalition to be built using non-government-held votes.
Minority shareholders have rights even without majority voting control. Some of those rights do apply to non-voting shares, but they're much more limited.
GOOGL isn't particularly relevant here; all that says is that investors today are confident in the leadership's plans. That could change tomorrow, and it means nothing for Snapchat.
It's more of an indicator of the current level confidence in Google's leadership. You can look at that as a point-in-time snapshot of how much investors value voting rights in Google today, sure, but that doesn't mean much for Google a year from now, or for Snapchat today.
If investors lost confidence in Google's ability to execute and believed that the leadership was the root cause of this failure, then the ability to vote them out (or even simply put pressure on them) would carry a greater premium than it does today.
The material difference is the product - who it will appeal to, and how long it will remain appealing.
When FB went public, they had a product that was appealing to parents, grandparents, and everyone else.
Snap has currently a niche offer, that may not get traction into other demographics.
In order to justify their valuation they have to have a ubiquitous penetration, and I don't see them getting it - at least not with the offer they have today.
(1): https://techcrunch.com/2012/02/01/facebook-1-billion-profit/
Huh? Snap is mobile only. Facebook was way behind in mobile, particularly in advertising (I don't think they even did mobile ads at that point). On the growth point, unless they do something really cool, I think they're screwed. Instagram has them covered and Snapchat growth slowed significantly since Insta Stories launched.