Snapchat is a fun and quirky social media app. It lets users communicate through snap stories that bears humorous, trendy, and creative filters. Though, not everyone knows about Snapchat, and how it really works, a huge portion of teens and young adults are addicted to the app. Thus, when the company Snap Inc (SNAP.N) opened their stock to the public, young investors hurdled to buy a share. However, skeptics say, it may be a reckless move for these millennials. Seasoned investors say the stock may be too volatile, but the young adults’ high affinity with the app has made them want to jump in. Now, these novice investors are asking for more IPOs.
Have the young investors gone reckless or are they genius?
Chris Roh, a 25-year-old software engineer in San Francisco, who has only been trading stocks for about a month said, “I bought it even when I was pretty positive I would not make a profit in the short run, but just because I am a fan of the product.”
On March 1, Snap Inc announced they are selling shares at $17 a piece in its IPO. During the first day of trading on the New York Stock Exchange, the stock rapidly inflated to as high as $26.05.
The amount of Snap share continued to rise until the second day of trading, March 3. Its stock went as high as $29.44. However, the price sunk at 25 percent since, closing at $22.07.
“Snap just felt like the IPO of my time and seeing where Facebook and Amazon are now, I really think Snap has the potential to grow (like them),” said Kaleana Markley, a 29-year-old human resources consultant in San Francisco, who bought Snap shares as her first stock market investment.
Markley is also a user of the app. She said she bought some shares from Snap on the first day of trading, as well as the second day when when the stock is at the highest level of its short lifetime.
“There are a lot of companies I don’t know or recognize, but Snap, I use the product, and know everyone – my friends, my co-workers, even my parents – uses it,” Markley added.
However, after just two days of hype and bliss, the amount of Snap share, declined notably. Proving the old saying: what goes up must come down.
After a 59% hike during those two days, the price of every share went 12% down for the day and 19% off the high. Meaning, those who didn’t buy at the pre-trading IPO price of $17 probably lost.
“There’s always risk to everything,” said Tiffany Dun, a San Francisco-based mortgage consultant in her late 20s who who bought 125 shares in Snap on the first day of trading at about $22 a share. “I use the product and I like it, so I bought some.”
What do the seasoned investors have to say?
Snapchat has an average of about 158 million users daily. This could be another reason behind the enthusiasm of young investors about getting a share. Stock experts have a rather accurate guess on why these young adults seem to not consider the volatility of Snap Inc’s stock.
Dan Schatt, chief commercial officer at Stockpile said, “Snap is tapping into the pride of ownership (for millennials) which we don’t see often in the stock market.”
Chris Stearns, another young investor purchased 13 shares just recently. He is a 30 year-old young stock analyst from Virginia, who said he sees Snapchat as the next Facebook.
“Snap is the first IPO-centric stock I’ve taken,” he says. “It’s a huge growth opportunity.”
40 percent of Snapchat users are between the ages of 18 and 34. We can say it’s a blazing app, especially in the United States, which could also be a factor on why Snap stock has been the most talked about topic by investors these past days.
“Snap is offering the comfort of buying something that you know so well, understand and use it every day, which is what these young investors want,” said Schatt, whose teenaged daughter and son also bought Snap shares.
Ryan Eshaghi, 18, a freshman at the University of California Irvine, is one of the loyal users of the Snapchat app. He, too, bought 20 Snap shares. Though, he said he believes Snap is overvalued, he still decided to invest on their stock because being involved with Snap’s IPO “was memorable for me as a younger investor.”
He added, he’s not “too phased by the price fluctuations,” and says, “Snap will be fine because of their massive monetization potential.”
However, expert investors couldn’t help but worry about the young adult’s lack of critical thinking when it comes to stock investing. Shebly Seyrafi, managing director at FBN Securities said,
“One of the non-fundamental reasons driving the stock is that many millennials purchased Snap shares at inflated levels due to their preference for the product.”
“That is, not due to a real understanding of the number or valuation,” he added.