Avoid SNAP’s IPO

Snap (owner of SnapChat) is going public this week and with the company losing over $500 million with no outlook for profitability, it’s better to be safe than overpay. $25 billion seems to be the rough valuation at the moment, but remember this. When companies “exit” to the public markets, it’s usually at a higher valuation. Even Coca-Cola dropped 50% in its first year public. Snap is no Coca-Cola. Snap is one of 5 large social networks that lose money. Facebook is the only network that turns a profit.

Could Snap go from a $25 billion to $50 billion valuation? Sure. Irrationality is common in the stock market. The question is – what else would you buy with $25 billion? You could buy Twitter with  $13 billion left over.  Or, you could buy Whirlpool, Agrium, Citrix, or a host of others with money left over.

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