On Thursday morning, Snap Inc.'s 26-year-old chief executive Evan Spiegel and 28-year-old chief technology officer Bobby Murphy swapped their beachside V-neck T-shirts for button-downs, darks suits, and gold and blue ties.
Standing before a sea of stock traders, news cameras and big screens with Snapchat's faceless ghost logo to mark the occasion, the pair rang the opening bell at the New York Stock Exchange, signaling the company's public market debut. Phones rang. Fingers swiped across tablets. Traders negotiated. Finally, screens at the stock exchange, Snap executives and investors lit up with excitement as the company's shares climbed.
The Los Angeles company, which makes the popular photo and video-messaging app Snapchat, held the biggest initial public offering for a Los Angeles company, a milestone that places the firm among the heavyweights of the technology world.
After pricing shares at $17 apiece to raise $3.4 billion, the company saw its stock leap 41 percent to $24 when it began trading under the ticker symbol SNAP around 8:15 a.m. EST. Shares hovered around $25 before closing at $24.48 on Thursday, valuing the company at more than $34 billion. Demand for shares has been 10 times the supply despite questions about Snap's growth prospects.
"Some of the hype comes from the fact that Snap is the last large social media company that people can invest in on the public market," said Rohit Kulkarni, managing director of investment research firm SharesPost.
Twitter went public in 2013, Facebook before it in 2012. Analysts believe that the enthusiasm for Snap has been heightened by both the dearth of major stock debuts in recent years, as well as what is seen as the last chance for investors to jump on board the social media bandwagon.
"There has been a lot of pent-up demand from investors to have a piece of the new pie," said Pai-Ling Yin, an associate professor of entrepreneurship at USC. "Snap's timing is great for that, but you have to keep that in mind when considering how to interpret the first-day valuation."
Experiencing a "pop" _ when a company's stock jumps immediately after an IPO _ is not unusual for technology firms, especially as they deal with the sudden rush in investor interest. But a day-one pop isn't indicative of a stock's long-term prospects. Twitter went public at $26 a share, experienced a 73 percent pop to $45.10, and today trades at only $15.72. Facebook, meanwhile, went public at $38 a share, surged nearly 18 percent during its first day of trading, then fell to Earth six months later at a low of $17.55. The company's stock today trades at $136.
Which is to say it's far too soon to know how Snap's stock will perform in the long run.
"During an IPO there's a sense of euphoria, and people like to think they're part of the latest and greatest thing, but current pricing does not reflect the risks and challenges the company will have to deal with later on," said Clement Thibault, a senior analyst at Investing.com. "It'll take a little while longer for the market to get a good judgment on Snap's value."
Still, that didn't stop the company from celebrating.
Outside Snap's main offices in the Venice area of LA early Thursday morning, a steady trickle of about two dozen employees arrived at work, some carrying balloons, others a bottle of wine or champagne.
When Spiegel and Murphy rang the opening bell in New York, cheers and applause erupted from inside the building.
The IPO process caps a momentous rise for the nearly 6-year-old company founded at Stanford that was dismissed early on as a tool for sending explicit images. It since has grown into a trend-setting chatting and entertainment service, famous for its disappearing messages and whimsical photo- and video-editing tools, used to add things like bunny ears or face-swaps to existing images.
Snap's IPO is the most lucrative in the U.S. since online shopping company Alibaba raised $22 billion in 2014 and the biggest for a tech company since Facebook's $16 billion haul two years before that. Facebook and Visa are the only California companies that brought in more cash than Snap through an IPO, according to FactSet data.
The stock debut makes Spiegel the youngest chief executive of a company listed on Nasdaq or the NYSE, according to FactSet. Among firms in the S&P 500, a grouping of large public companies representative of the U.S. economy, the only CEOs under age 40 are Facebook's Mark Zuckerberg, 32, and Kimco Realty's Conor Flynn, 35, according to S&P Global Market Intelligence.
The IPO is also a major financial and symbolic moment for the company. The infusion of cash will allow Snap to expand, solidify its reputation and pay its investors. It also means greater responsibility now that Snap must disclose financial results.
Employees also can begin cashing out stock grants earned as part of their compensation in about five months, minting hundreds of new millionaires in the process.
The influx of capital and the validation of a stock exchange ticker also comes with additional scrutiny, though. Snap became the first company to sell IPO shares that lack voting power _ a move that frustrated investors and has drawn the attention of regulatory advisors. Funds including the California teachers' pension fund say they deserve a say in company matters such as mergers and board member selection, even if just a token vote.
Analysts also question whether Snap has the chops to live up to its whopping valuation.
The company generated $404.5 million in revenue in 2016, mostly from ad sales, which will be Snap's dominant source of revenue for the indefinite future. But $924 million spent on hosting costs, revenue-sharing agreements with content partners, research and development as well as other costs left Snap with a $514.6 million loss. In 2015, when advertising efforts were nascent, the company had $58.7 million in sales and a $372.9 million loss.
In its S1 filing, the company also reported that user growth has slowed, and that the firm will not be able to keep up its past feverish growth rate. Once growth slows, the company's financial performance "will increasingly depend on our ability to elevate user engagement or increase our monetization of users," Snap wrote.
While it's not unusual for a company still posting losses to go public, it remains to be seen whether Snap will take after Facebook, which last year made more than $10 billion in profit and now has more than 1.8 billion monthly active users, or Twitter, which continues to operate at a loss and has struggled with getting new people to use its platform.
"When Twitter user growth stalled, it led to a stalling of revenue growth," said Ryan Jacob, whose firm Jacob Asset Management holds stocks in both Facebook and Twitter. "I don't think anyone questions Snapchat's advertising effectiveness. The question is, 'Does the slowing continue or do they reaccelerate growth?' That's what everyone is going to focus on."
The company has no shortage of hurdles. Its youthful demographic is seen as both a blessing (coveted by advertisers) and a curse (finicky and quick to move on). Facebook continues to nip at its heels, with the Facebook-owned Instagram and WhatsApp playing copycat to Snapchat's features.
And now that it's subject to the Security and Exchange Commission's quarterly reporting requirements, the company will have to answer to Wall Street, which is notoriously unforgiving toward companies that fail to meet growth and earnings expectations.
"Every technology company gets some kind of grace period when it enters the market," Thibault of Investing.com said. "But as soon as Snap's first earnings report comes out, it will be compared to other companies'."
Hours after the IPO, as analysts continued to fret over Snap's long-term viability, Spiegel and Murphy headed to a brick-walled coffee shop in Brooklyn, N.Y. Spiegel's tie had come off. He looked exhausted.
"How do we feel? We were just thinking about how do we answer that question," he told the Los Angeles Times. "It's exciting."
