Snap, the social network that says it’s a camera company, closed its first day of trading up 44 percent from its initial offering price of $17.
That’s a remarkable open, since new issues typically experience a lot of seesawing on the first day as investors weigh demand for the stock against the company’s actual business. Snap lost more than half a billion dollars last year.
You could argue Snap’s underwriters priced it too low at $17 a share since it traded most of today between $24 and $25. But the fairly steady orders showed the bankers did a decent job. It was a smooth IPO.
But now, CEO Evan Spiegel has to prove Snap is more like Facebook than Twitter. He’d say it’s neither — it’s a camera company! — but as far as the markets (and most people) are concerned, those are the most relevant comparisons.
For the moment, Snap looks more like Twitter. The company lost $514 million on $404 million in revenue last year. The year before Twitter’s IPO, it lost $79 million, while Facebook made $1 billion. Snap has 158 million daily active users. Twitter, which only reports monthly active users, had 218 million when it went public.
You could also argue Snap went public too early: It’s a secretive company ruled by CEO fiat. Spiegel, one of the most laconic business leaders in memory, likes to keep things close to the vest, and he tends to make decisions entirely on his own.
That certainly comes across in Snap’s prospectus, which makes clear it’s a founder’s company. Like Google and Facebook, it’s controlled by co-creators Spiegel and Bobby Murphy.
What makes Snap even more unusual is none of the openly traded shares get any voting rights at all. Investors have to put their faith entirely in Spiegel and Murphy. If they don’t like the company’s direction, their screaming won’t carry any weight. They could always sell their shares, of course.
Part of the issue is that Snap still looks like a startup. It lost half a billion dollars last year, even more than the $373 million it lost in the prior year. Expect more of that the company suggests in its prospectus, which is a page out of Amazon CEO Jeff Bezos’s playbook: dominate through expansion, even if it costs a lot.
Snap wants to do the same. In fact, the smart tech CEO will look to Bezos as the model manager, bound by two main tenets:
- Trust me.
- Don’t expect profits anytime soon.
This article originally appeared on Recode.net.