Curious why the writer didn't think this phrase warranted its own sentence: "... a $2 billion expense related to stock compensation." Maybe because it's become business as usual for "twenty-something" tech founders and investment friends to pay themselves first and pay the business later or never? Best to get what you can before the company implodes a few months out.
1
I really think that these investors need to actually start communicating with people who actually use these apps. Anyone can see that Snap doesn't provide the robust features needed be the next Facebook. Investors also need to come to terms with the fact that a application that exists on mobile devices only isn't terribly useful as a result of the structural limitation of phones (tiny screens with limited battery life).
1
"No one ever went broke underestimating the intelligence of the American public"
~~HL Mencken
~~HL Mencken
2
Party like it's 1999
1
One-time expenses aside...
I can't understand the fuss around a company that came into existence with the goal of allowing underage teenagers to send each other ephemeral crotch shots.
I can't understand the fuss around a company that came into existence with the goal of allowing underage teenagers to send each other ephemeral crotch shots.
2
A couple of visits to Snapchat and the phrase "how is this a thing" came to mind. A scheme to make founders and startup investors wealthy and wealthier, but little more. The IPO will not make others wealthy unless Snap is bought by a far more successful interest company.
Eclectic Pragmatism — http://eclectic-pragmatist.tumblr.com/
Eclectic Pragmatist — https://medium.com/eclectic-pragmatism
Eclectic Pragmatism — http://eclectic-pragmatist.tumblr.com/
Eclectic Pragmatist — https://medium.com/eclectic-pragmatism
1
Part of the loss: the CEO dealt himself a 600 million dollar bonus for taking the company public, while executives pocketed 1.4 billion.
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$805.8 million for R&D? And what do they have to show for it?
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I know! I wish the small biotech firm I work for had that kind of cash ... we would have cured hemophilia by now.
1
Theranos?
7/29/17- the day of recognition for shareholders. SNAP's lock-up period ends. 80% of the outstanding shares are free to trade, meaning institutional shareholders who were rewarded shares of the IPO can now bail , if they wish. Watch how the shares trade 10 days leading up to the lock-up date. That should be an indication of where the smart money is going.
1
I would think that Katie Benner (the author of this article) would be a little bit more detail-oriented (or financially aware) and see from the filed 8-K report that most of the spending this quarter in her paragraph below is actually stock-based compensation. (payouts to employees from the IPO) The actual underlying spending on these areas is nowhere near the inflated figures quoted.
"...Snap is also spending handsomely to create products to engage users. It spent $805.8 million on research and development in the first quarter, 28 times higher than a year ago. Marketing costs skyrocketed to $219.7 million, from $14.7 million a year ago...."
"...Snap is also spending handsomely to create products to engage users. It spent $805.8 million on research and development in the first quarter, 28 times higher than a year ago. Marketing costs skyrocketed to $219.7 million, from $14.7 million a year ago...."
1
"$2 billion expense related to stock compensation"
What does this mean?
That insiders got paid?
What does this mean?
That insiders got paid?
1
The employees got paid in stock. Snap had to capture this value as an accounting expense.
1
Yes, they were paid $2 billion in stock.
https://www.recode.net/2017/5/10/15617740/snapchat-two-billion-loss-evan...
https://www.recode.net/2017/5/10/15617740/snapchat-two-billion-loss-evan...
I am a couple of decades older than their "attractive" demographic of 18-34 year olds but I have come to love Snapchat. I love the stories that my kids send me and it is often the first thing I check when I wake up in the morning. It is a great way of staying connected to loved ones around the globe. I never see ads when I use Snapchat because I don't look at the content that they produce. I would rather pay for the service than see a bunch of ads. I hope they find a way to prosper. As for Facebook, we may all have accounts but it seems to me that fewer and fewer people are actually using them.
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I suppose people are willing to accept advertising when they browse, but not when they communicate with one another.
That to me seems like the bottom line.
That to me seems like the bottom line.
1
One reason for shares plunge is that the growth in the number of users has registered a downward trend - 36 per cent growth in the number of daily users to 166 million in the first quarter from a year ago,down from 53 per cent growth in the first quarter of 1016. People seem to be more familiar with WhatsApp,competitor of Snapchat. Stock Exchange floor trading is interesting sometimes before the advent of computerisation. I was witness to this .Mumbai's stock exchange opened its doors to the public on the Diwali day (Indian festival of lights)- separate corner for each company's share trading - brokers shout the price. I was standing in a corner,and one broker thought that I belonged to his fraternity. He just grabbed my collar,and asked for the share price of a particular company. I told him that I was not a broker,but he will not budge,and luckily I overheard the share price trading at Rs.385. When I blurt out this figure,he left my collar. Unexpected . Computerisation has taken away such funny moments from the stock exchange. There is less awareness about snapchat than WhatsApp,which is widely used.
It's the tulip craze, with a difference. Tu;ips have intrinsic value. The few hundred lines of code that make this dumb little app up have no intrinsic value.
4
It was always evident how much of a fraud this was with the company rushing to do an IPO as the growth of subscribers was noticeably slowing. The company also came out with a novel but cheezy pair of sunglasses with a simple camera and says they are becoming a camera company. Those who lost their money deserve it for being so gullible and greedy. There's nothing there there.
The IPO raised billions, $2 billion of which went directly imto the pockets of the two twenty-something "founders".
The audacity and outright thievery of theses "founders" apparently knows no bounds. Nor does the stupidity of the "investors".
I have to admire the shamelss skill with which these"founders" fleeced the "investors". Sheer genius!
The audacity and outright thievery of theses "founders" apparently knows no bounds. Nor does the stupidity of the "investors".
I have to admire the shamelss skill with which these"founders" fleeced the "investors". Sheer genius!
1
Okay, but in all fairness, the investors knew that this payout would be given if Snapchat went public -- that was part of the deal. The investors did very well, too.
"after its much-celebrated initial public offering..."
"much-celebrated"? Much-celebrated by whom? The VCs, bankers, and fast-talking con artists who foisted this junk on the public? Because the rest of American society should be in mourning watching the continual trashing of our capital markets' standards by deals like this. Deals like this are horrible.
"much-celebrated"? Much-celebrated by whom? The VCs, bankers, and fast-talking con artists who foisted this junk on the public? Because the rest of American society should be in mourning watching the continual trashing of our capital markets' standards by deals like this. Deals like this are horrible.
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$2.2 billion in losses? Oh snap!
2
In spite of my immense disinterest in this company, its stock, and any of its products, I think it was a cheap shot to not clarify the actual hemorrhage rate earlier in the article.
Let's see: "Snap’s $2.2 billion loss for the first quarter, which included a $2 billion expense related to stock compensation, was far above its $104 million loss a year ago."
This is a very legitimate reason Silicon Valley dislikes expensing stock options, because idiots in the press will salivate over a big number that does not matter. Stock grants are part of putting a startup together, and is very different issue from a more mature profitable company doing similar.
Burning $200 million in cash is not necessarily a bad thing at this point, but it does need to be put in context of user growth and revenues. This reporter never gets around to giving us more context than the numbers are not good, well, at least according to someone I am not sure understands the numbers.
Let's see: "Snap’s $2.2 billion loss for the first quarter, which included a $2 billion expense related to stock compensation, was far above its $104 million loss a year ago."
This is a very legitimate reason Silicon Valley dislikes expensing stock options, because idiots in the press will salivate over a big number that does not matter. Stock grants are part of putting a startup together, and is very different issue from a more mature profitable company doing similar.
Burning $200 million in cash is not necessarily a bad thing at this point, but it does need to be put in context of user growth and revenues. This reporter never gets around to giving us more context than the numbers are not good, well, at least according to someone I am not sure understands the numbers.
1
Sorry, laughable nonsense. The service provided is nothing of note, but the hyping of the company and worse, of course, the claim on the company's earnings - in the negative $2 billion territory, regardless of the expenses that make up that figure - the stock are a function of pure unadulterated greed. This is typical of this latest wave of tulipmania, as someone else notes. There is no there there, as another saying goes.
This company, the service it offers, the corporate officials are all a joke. There is nothing there by dishonesty, incompetence, egotism, the arrogance of youth and vacuity. But what's new in the pathetic industry known as social media?
1
There are many of us in the San Francisco area hoping for the tech bubble to burst. Maybe this is a start.
2
So you can return to your neighborhoods? Totally with you there.
1
Why, so there can be more homeless people in San Francisco? I was there last year, and the place is teeming with panhandlers. I don't think a bunch of companies failing is going to help.
"Snap’s shares plunged in after-hours trading to about $17.27, just above the company’s I.P.O. price of $17 a share."
Sounds like the market is working just the way it's supposed to be, with Snap pricing its shares at their actual value instead of some under- or over- inflated price.
Sounds like the market is working just the way it's supposed to be, with Snap pricing its shares at their actual value instead of some under- or over- inflated price.
7
Snap really looks like a fad to me. It's the latest cute toy on my mobile. Sure, there are millions more users who could sign up, but after a year, what's in it for them? They'll be on to the next fad.
6
You must not interact with young people too much. They love this app. Much more than Facebook. Facebook is for older people.
I suspect the IPO expenses were primarily payments to all the involved tech bros and their bankers.
1
"Snap’s $2.2 billion loss for the first quarter, which included a $2 billion expense related to stock compensation, was far above its $104 million loss a year ago. Revenue was $149.6 million," I'm sorry, I'm no math wizard but isn't this the definition of bankruptcy? Huge losses exceeding revenue by more than 10 times? Even forget the "stock compensation" (whatever that is) losses exceed revenue by 25%.
9
No bankruptcy is when a company can no longer meet its financial obligations. For well funded companies like Snap with large cash reserves, they can afford to be incurring losses for many years before they eventually turn things around or run out of money!
1
This is what people who invest in tech companies fail to see - they are paying the companies' employees.
The stock compensation expense is a one time non-cash expense related to the value of the stock they pay their employees. If every company that reported a loss was considered bankrupt, most companies would be bankrupt at one point or another. Snap is still very much solvent. They have significant cash and predicted this bumpiness in their ipo filing.
"Greater fools.." indeed.
6
I would have likes to have seen the nytimes cover the snap ipo a little more critically. There's a problem brewing when a company can issue nonvoting (dual class) shares under reduced financial accounting regulation (JOBs act) to largely novice investors (young kids) at 59 times revenue (Facebook was 27 times).
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A waste of time becomes a waste of money! Perfect!
32
Since Snapchat doesn't even hide your sent photos (which caught the FTC's attention before Boss Tweet swept in and sabotaged all the good government departments), they turned to the one business we don't need more of: advertising! (Both of itself with the help of all-too-willing news companies, and of companies who want to be "trendy" or at least "trending". Gag.)
May the losses grow for those overpromoted frauds.
May the losses grow for those overpromoted frauds.
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(Or delete the sent photos, rather.)
Deja vu all over again.
7
Snapchat -- old vine (sic) in a new bottle. Meh.
11
Zuckerberg couldn't be happier. But still a threat to his bottom line and his desire for sole ownership of such apps-users. Seems he'll need to sell more than just "reverse-engineered" SNAP concepts to continue holding his current market share.
5
Granted it was bad, but it is pretty odd to neglect to mention that $2b of the $2.2b was for one-time IPO expenses.
20
The article states"Snap’s $2.2 billion loss for the first quarter, which included a $2 billion expense related to stock compensation, "
Even taking out the $2 billion, the loss this year is twice the previous year's loss.
Even taking out the $2 billion, the loss this year is twice the previous year's loss.
2
Irrelevant. A loss is a loss. Noteworthy is the size of the loss: $2.2 billion. And, by the way, what are revenues? $150 million for the quarter. Please.
4
This has little to do with IPO expenses and everything to do with stock the executives dealt themselves with no vesting period, including a 600 million dollar "bonus" Spiegel took for taking this outfit public. The company also paid the app's developer and one time partner 150 million for stealing his idea, although payment was made in the prior year.
It has to me a very large company to
lose $2B.
lose $2B.
4