Hooray! Snap is a public company and everyone on Wall Street is acting like it's the second coming of Facebook while everyone in Silicon Valley giggles harder at them with every dollar that pours into the market's newest thirst trap.
And it seems that - so far - the thirst (if not the basic fundamentals) is genuine.
While we've made our opinion of SNAPcrystal clear, we admit that we have no real idea how this whole thing is going to turn out in the long-term. But it turns out that neither does Snap's founder and CEO.
According to an interview with the Los Angeles Times, Snap's fearless 26-year-old leader Evan Spiegel is super-psyched about his IPO and thinks you should be mad pumped for buying it, bro. He's just gonna need like half a decade to explain why...
Stock market analysts have questioned why Snap went public at 6 years old with nascent revenue-generation and increasing losses. Spiegel said he sees a benefit in having the company’s value determined by public markets as he and Murphy try to grow the business.
They recognize there’s a disconnect between how investors and much of the public want to see Snap evolve — preferably something as ubiquitous as Facebook — and the path they see the business taking. Facebook has reached immense value by connecting 1.9 billion people to its social network, but Spiegel believes Snap could become just as valuable by building a smaller, more personal service.
“We built our business on creativity,” Spiegel said. “And we’re going to have to go through an education process for the next five years to explain to people how our users and that creativity creates value.”
So yeah it's gonna take like five years or so to show people the value of Snapchat. And we can't see anything wrong with that plan what with the public market being so fond of waiting quarter after quarter for a company with no history of profitability to demonstrate an intrinsic value.
Aside from Amazon, no one pulls off the "Coming soon: Money" trick for very long. Remember Twitter?...
But one thing that people saddled with those stocks had that Snap investors won't is an ability to officially complain about how terribly they think things are going.
Here's some insight from the LA Times piece into how Speigel views his shareholders:
And [Speigel is] dubious about concerns that Snap can’t continue to add new users. Though some investors may be closely watching user growth, Spiegel wants them to focus on how and how much users are interacting with the service.
“We’d rather inspire creation because we know a derivative of that is growth,” he said, noting that his head might still be in pitching-to-investors mode.
And Speigel isn't just recommending that shareholders focus on what he wants them to focus on, he's making it impossible for them to change the subject by restricting the vast majority of Snap shares from coming with voting rights. In fact, all Class C shares (A and B are available only to founders and early investors) purchased during the IPO were bought with the understanding that you will never vote on how Snap does business.
As we've said before, tech bros have been pushing the frontiers of shutting up shareholders for years now, but Speigel's codification of shareholder silence is unprecedented. So without precedent in fact, that the SEC is now pondering if it's cool with the idea of a 26-year-old who lost more than half a billion dollars last year alone doling out ball gags with every share purchase agreement:
An investor committee that advises the U.S. Securities and Exchange Commission will next week review if Snap Inc's decision to deny shareholders voting rights might also reduce the social media company's public disclosures on executive pay and other governance matters, the head of that committee told Reuters on Wednesday.
Essentially, the SEC is wondering aloud if Snap really gets, like, how a public company works or whatever.
Snap insiders and early investors hold shares with voting rights, giving them control of the company.
For Snap, "The question becomes, since there are no common shareholders' proxy votes to do, what does that do to the level of disclosures it will have to do for annual meetings and annual reports," Kurt Schacht said in a telephone interview.
Schacht is chairman of the SEC's Investor Advisory Committee, which makes recommendations to the regulator and was set up by the 2010 Dodd-Frank financial reforms. The SEC does not have to follow its suggestions. Schacht is managing director of the CFA Institute, which accredits investment professionals.
The committee has a meeting scheduled for March 9 that will include a discussion on "unequal voting rights of common shares," according to a published agenda for the session.
So now we're left to sit back and think "What the fuck is even happening here?"
In a BreakingView column published earlier today, Rob Cox gave our favorite answer to what we just saw:
Investors have effectively just done what no self-respecting person ever should: wear sweatpants in public. With Snap's $3.4 billion initial public offering they have simply given up giving a damn. They handed their money over to an immature company and in the process abrogated their rights to fair treatment, good governance and reasonable valuations. If the $24 billion self-styled "camera company" run by a 26-year-old fails to achieve its ambitions, shareholders have only their capitulated selves to blame.
Amen brother. We'd hit you up on Snap to tell you how much we love this but - like most of Wall Street - we don't know how it works.
Exclusive interview: Snapchat founders Evan Spiegel and Bobby Murphy discuss historic IPO and company's next steps [LA Times]
Exclusive: SEC advisory committee to question Snap's transparency for investors [Reuters]
Cox: Snap IPO marks moment investors donned sweats [BreakingViews]