Snapchat's IPO is too early

Snap's IPO creates skepticism among experts

So it should be at the beginning of March. Snap, the company operating the popular Snapchat photo app, will go public. At 19.5 to 22.2 billion US dollars, it will be worth a little less when it hits the floor than previously assumed. But even at the lower end of the range, it would be the largest tech IPO in the US since the e-commerce giant Alibaba went public in 2014. According to Snap, an initial share placement will generate the equivalent of around 2.8 billion euros.

But some stock market experts are already ringing the alarm bells. "We are quite skeptical about the IPO," says Marc Tüngler, General Manager of the German Association for Protection of Securities (DSW). In addition to the "very high" rating, there is also the fact that only shares without voting rights will probably reach the market. "The new shareholders may give their money, but they shouldn't get any influence," said Tüngler.

The lawyer also refers to the DAX30 listed branded goods company Beiersdorf, which is currently valued at 21 billion euros and generated a profit before taxes of almost 970 million euros in 2016. Snap, on the other hand, had sales of 375 million euros and a loss of more than 480 million euros for the same financial year.

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The idea favored by Snapchat of wanting to earn money primarily with advertising in the future will probably sound familiar to many Twitter shareholders. The short message service was also viewed critically when it went public in 2013, at that time it had sales of half a billion euros and losses of 133 million. And Twitter is still stumbling: To date, CEO Jack Dorsey's company has not been able to build a profitable business model through advertising revenue.

The growth in user numbers and sales even slowed in the fourth quarter of 2016, the loss increased significantly. "The Twitter course is a prime example of a society that started with high expectations that could not be fully met," said Tüngler. Profits were made primarily by those who opted for the early exit: Those who entered at the first price of around 38 euros and are still there, are now sitting on a loss of 54 percent.

"The Twitter course is a prime example of a society that started with high expectations that could not be fully met"

Marc Tüngler

And Twitter is not the only tech company that has been disenchanted on the trading floor. Once promising companies like Linkedin, Groupon, Jive, Zynga and last but not least Yahoo have lost up to 80 percent of their value. One of the big winners is Facebook. Hardly any other tech group has benefited as strongly from the trend for online advertising in recent years as the social network. Incidentally, CEO Mark Zuckerberg was also criticized while walking on the floor because his company threatened to oversleep the development towards mobile.

So that's half as bad for Snap? Are the concerns unfounded? No, thinks the stock market expertKlaus Kirchhoff. The CEO of Kirchoff Consult justifies this with the advantage of Facebook, which could be a platform for all target groups, including companies. "In addition, Facebook has conquered the high-income older generation, which Snapchat will not be able to do in my opinion." Kirchhoff is therefore "very skeptical" with regard to the Snap IPO.

And that's also because the numerous attacks from the Facebook camp will cause problems for Snapchat, predicts Kirchhoff. The world's largest network copied the Stories function, which had become popular on Snapchat, last autumn and integrated it into the Instagram service. And very successfully: Over 150 million Instagram users, including many company accounts, now use this function on a daily basis. Now the story function will also be rolled out in Whatsapp and soon also in the Facebook app itself. That could be the knockout blow for Snapchat.

No wonder that Snap CEO Evan Spiegel has been trying to promote his venture on an IPO roadshow since Monday. According to information from "Reuters", however, the potential investors are said to have been quite disappointed because Spiegel is said to have kept a low profile with regard to future earnings. "That's the million dollar question, and we don't know the answer," Reuters quoted a potential donor as saying. ron