Who Got Rich from the Snap IPO in 2017?
The first big tech initial public offering (IPO) domino in 2017 has fallen: Snap Inc (NYSE:SNAP) is public. The Snap IPO in 2017 was one of the most anticipated events of the year, and it could very well be the largest tech company we see go public this year.
While the SNAP stock forecast right now looks a little rocky since its debut, that hasn’t stopped a whole lot of investors aside from co-founder and CEO Evan Spiegel from raking in boatloads of money after the social media giant hit the markets.
The Snapchat IPO valuation of $28.3 billion after markets closed on the stock’s first day as a publicly traded share is leading some analysts to question the true value of the company. After all, the company had one of the biggest disparities in valuation compared to sales, not to mention that Snap does not have a path to profitability and is, in fact, losing money at an alarming rate.
SNAP stock is by no means doomed, however, as the company may mirror the success of other tech IPOs. Even Facebook Inc (NASDAQ:FB), a company that any up-and-comer would love to emulate, had its troubles when it first entered the public markets. Some of our own analysts have even compared Snapchat to Facebook, which would certainly bode well for the SNAP stock price.
Snapchat lost a reported $514.6 million in 2016. Eventually, SNAP stock will need to sort out a path to profitability if it wants to avoid becoming the next tech stock horror story. (Source: “Snap lost $514 million last year and warns that it ‘may never be profitable’,” Business Insider, February 2, 2017.)
While the company continues its transformation into a “camera company,” questions abound as to whether Snap has the potential to be a huge player in the tech market.
“Snap Inc. is a camera company,” reads the company’s web site. “We believe that reinventing the camera represents our greatest opportunity to improve the way people live and communicate.” That’s a big departure from what Snap does well: social media apps. (Source: “Snap Inc.,” Snap Inc, last accessed March 15, 2017.)
Not to mention that threats and rivals abound. “Instagram,” for instance, has made no effort to hide its attempts at aping Snapchat.
Whether the two are destined to meet in some titanic social media clash for the ages or can co-exist peacefully has yet to be seen. But this does add another layer of intrigue over whether NYSE:SNAP will have the longevity to secure sustainable, steady gains against some of these opposing forces.
But all those questions are based on long-run projections and are forward-facing. In the present, a good number of Snap stock investors struck it rich, while Evan Spiegel became an instant multi-billionaire.
Below, we’ll take a look at some investors who added several zeroes to their bank accounts following the Snapchat IPO.
1. Evan Spiegel
Though CEO Evan Spiegel was initially only supposed to bring in about $3.9 billion after the sale of the 16 million shares as intended, the sudden spike in SNAP stock value has pushed that sum up considerably.
NYSE:SNAP closed its first day of trading at $24.50 per share. While it has come down since then, measuring on that day, Evan Spiegel would have been worth $5.2 billion. And that’s without including the value of the 16 million shares he and co-founder Bobby Murphy planned to sell. All in all, Spiegel’s full earnings after the first day of trading puts his net worth as high as $5.5 billion, which amounts to a $1.6 billion increase on the payday he had expected. Not too shabby. (Source: “Meet the Snap IPO Billionaires,” Fortune, March 2, 2017.)
Spiegel also has a good haul of shares with voting privileges (10-vote Class B and one-vote Class C stock), which are likely valued at a five percent-to-10% premium over the price of regular SNAP stock, which is non-voting. Add in the premium and you now arrive at a net worth for Evan Spiegel of $5.9 billion.
Evan Spiegel SNAP Stock Holdings
|Class C||107,943,924 + 37,232,102 bonus for going public|
2. Bobby Murphy
As the co-founder of Snap, CTO Bobby Murphy enjoyed much of the same gains that Evan Spiegel experienced.
The two began as frat brothers, but now lead one of the biggest tech companies on earth. Murphy is behind a lot of the work that gets done at the “Snaplab” division.
While his coffers are probably not as packed to the brim as Spiegel’s, he’s by no means a pauper. An estimate had Murphy’s worth projected value as $3.86 billion, and that was when shares were valued at $17.00 apiece. With the stock price increase and the premium of his voting shares, it is likely that Murphy’s wealth exceeds the $5.0 billion mark. (Source: “Snap CEO Evan Spiegel is set to make $4.5 billion — here’s who else will get rich from the Snap IPO,” Business Insider, March 1, 2017.)
Benchmark has the largest stake in Snapchat compared to other venture investors, due to a funding round in 2013 when it acquired a fairly large stake in the company. After the first day of trading of Snapchat shares, the company likely made about $3.2 billion from its stake in Snap.
Benchmark SNAP Stock Holdings
4. Lightspeed Venture Partners
Lightspeed Venture Partners was one of the first backers of Snapchat, coming at a pretty opportune moment, just when Snapchat was about to run out of money. As such, Lightspeed has a good chunk of SNAP stock and has benefited greatly from the roaring debut of the company, making over $2.0 billion.
Lightspeed Venture Partners SNAP Stock Holdings
5. Timothy Sehn
Timothy Sehn joined Snapchat in 2013 and helped grow Snapchat’s software-engineering team more than tenfold in that time. Sehn is the VP of Engineering at Snap. His stake in the company earned him a cool $161.9 million after the first day of trading.
Timothy Sehn SNAP Stock Holdings
6. Michael Lynton
The former Sony Entertainment CEO stepped down from his position at Sony in order to dedicate himself to Snap, where he serves as chairman. He’s been with the company since 2013, and is considered a close adviser of Spiegel.
And that has certainly paid off. Lynton made somewhere in the ballpark of $72.4 million after trading closed on Snap’s first day as a public company.
Michael Lynton SNAP Stock Holdings
7. Imran Khan
When Imran Khan joined Snap Inc in January 2015, he brought some powerful connections with him. Coming in as the chief strategy officer, his past in the banking world helped him nab a $200.0-million investment from Alibaba Group Holding Ltd (NYSE:BABA). Khan had served as the lead banker for the Chinese company’s IPO, so that certainly helped facilitate the partnership of these two companies.
Khan was integral to the SNAP IPO in 2017. His past with Alibaba certainly didn’t hurt. For his service, Khan was not under-compensated. He walked away $68.0 million richer.
Imran Khan SNAP Stock Holdings
SNAP Stock Forecast
So we all know who got rich from the Snap IPO in 2017, but aside from these lucky individuals walking away with multi-million-dollar and multi-billion-dollar paydays, how can you, humble investor, make money off the stock?
That question is a little trickier to answer. Building a time machine and finding a way to get in early wouldn’t hurt. But, barring that, the outlook of Snap stock is harder to predict.
While the company certainly has potential to be one of the bigger winners this year, as mentioned at the outset of this article, there are a number of challenges that the nascent social media giant will now have to face after having gone public.
With Facebook gunning for Snapchat via Instagram, there’s sure to be some tension between the two companies as time goes on. Remember that Facebook approached Evan Spiegel with a $3.0 billion offer for the company. While it seems that Spiegel made the right choice opting to take the company public and refusing the deal, earning him double the paycheck that Facebook was offering, it is doubtful that Facebook will relent on its attempts to steal away Snapchat’s market share.
Other issues that face the company include the company’s current inability to make a profit and potential obstacles to getting in the black. For instance, Twitter Inc (NYSE:TWTR) had the same issue and instead diverted investor attention toward growth. Of course, when growth began to dry up, so too did TWTR stock wilt away.
While Snap has vigorously attempted to fend off the Twitter comparisons, they exist for a reason. Hyped-up tech companies with strong IPOs aren’t a guaranteed success. The key is how Snap manages itself going forward.
Not to mention that the pivot toward hardware is a difficult one to make. The company’s first offering, wearable tech called “Spectacles” (glasses that house cameras), haven’t been out long enough to validate or reject that potential revenue stream, but there’s a vast gulf between gaining millions of users on social media versus selling millions of devices.
I personally see more Twitter in SNAP stock than Facebook, but that doesn’t mean the potential isn’t there. The key is to watch the trends and make sure to follow closely as to whether this company can put itself on a steady path to profitability and maintain strong growth numbers. If those two conditions are met, then we’re looking at a winning stock for years to come. Otherwise, I would stay away from Snapchat as a long-term investment.