For the first time since its IPO in early March, Snapchat’s parent company Snap dropped below its IPO price on Monday. Snap had priced its IPO at $17 on March 2 and saw the share price soar as high as $27.09 on the day after its IPO. Doubts about the company’s long-term outlook always lingered though and after reporting disappointing earnings for the first quarter, Snap’s share price started to tumble. On Monday, Snap’s shares closed at $16.99, down 37 percent from its early March high.
As our chart illustrates, many tech companies that went public this decade fell below that symbolic mark sooner or later, the question being whether or not they are able to come back up. While Facebook did so in impressive fashion and is currently trading at nearly four times its former IPO price, many others have yet to recover and maybe never will.
Some analysts are already predicting a similar fate for Snap, which has yet to prove it is really worth its current market capitalization of roughly $20 billion. Still far from profitable, the only thing that could justify the company’s lofty valuation would be explosive growth. As user growth appears to taper off and competition from Facebook looks stronger than ever, many shareholders seem to be jumping ship.
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