Snapchat’s millennial shareholders lose big

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File

Young people’s use of Snapchat drove the app’s parent company, Snap, Inc., to an initial public offering on the New York Stock Exchange that was valued at a market cap of $33 billion. That puts it in league with Marriott and Target, larger than Twitter but still far smaller than Facebook, according to CNBC.

Snap’s stock value grew steeply for two days and has fallen about 18 percent since. This means that Snap cofounders and majority shareholders Evan Siegel and Bobby Murphy each lost over $1 billion in net worth.

Don’t feel too bad for these guys… their estimated net worth still hovers around $4.9 billion EACH. Not too shabby for a 26- and 28-year-old.

It turns out that Snapchat’s shareholders look much like Snapchat’s major users, which is to say that both groups are populated disproportionately by young adults.

Market Realist reports that experts (read: experienced investors who are almost exclusively not millennials) are skeptical of Snap’s staying power:

Analysts believe, however, that it will be difficult for Snapchat to engage users for long periods of time, as compared to social media sites like Facebook (FB) and Twitter (TWTR). The application could also find it difficult to attract advertisers, as compared to Internet heavyweights like Google (GOOG) and Facebook (FB).

The stats tell a different story. Snapchat might be a newcomer, but it has a user base that is both large and very engaged. Reuters reports that approximately 158 million people use the app each day.

“Snapchat’s users…spend an average of 25 to 30 minutes on the app and visit it more than 18 times a day,” according to Reuters

It is rare but not unheard of for people to buy stock in a company primarily because they like the brand, as opposed to a belief that it will grow in value over time. Brand fans bought up GoPro, Manchester United, and Zynga (a gaming company), but the year’s most buzzed-about tech IPO “appears to be taking the enthusiasm to a new level,” Reuters reports.

This signals that millennial brand loyalty extends into the stock market. It is also a sign, however, that brand loyalty might lead people to bet against their own interests by choosing stocks based on branding and not on value.

This doesn’t trouble the many who were eager to buy Snap shares as soon as they could. If their investment pays off, it won’t be the first time that people underestimated Snapchat: The app was initially considered an outlet for sexting, but now that major news publishers have Snap channels, those feeds are a major part of how Generation Z gets its news.

Snap, Inc. has figured out how to take an image that disappears in ten seconds and turn it into a brand with real staying power.

 


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