The stock opened trading at $24!
Snap traded as high as $26.05 on Thursday, ultimately closing at $24.48.
That’s a 44% one-day gain (Friday it was up another 19% at one point). Those one-day-gains are why we invest in IPOs.
Obviously, not all IPOs have this much demand. But if you can participate in certain IPOs, easy profits can be made.
To participate in the Snap IPO, all you needed was access to IPO shares.
Easier said than done.
Snap Ignored the People Who Made it Successful
Access IPOs focuses on IPO access for ordinary investors. By ordinary, I mean the majority of investors, those who are not in the top tier of assets holdings for brokerage houses.
I’ve compiled a list of best online brokers for IPO access and included the minimum eligibility asset levels. TD Ameritrade, for example, requires $250,000 of assets in an account to get IPO access or 30+ trades in the previous 3 months for eligibility.
Fidelity requires $100,000 to $500,000 minimum account balance (depending on the partnering underwriter). But that’s just to get your foot in the door. In high demand IPOs, you’ll need upwards of one or two million to get access.
Snap’s user base is mostly younger users, under the age of 30. Those users don’t typically have assets over $100,000. So the very people who made Snap a successful business had no access to the IPO.
This, I believe, goes against a broader trend of allowing IPO access to customers to increase loyalty through stock ownership. Perhaps Snap ignored its users because there are too many. Had they sent an email inviting their many millions of users to participate, the demand would have been through the roof.
Or maybe the lead underwriter, Morgan Stanley, advised against offering shares to non-wealthy individuals so they and the other underwriters could reward their wealthiest customers.
It’s been a long dry spell for IPO investing. Not just for us small-time investors.
In the future, hopefully, we’ll see more access for brokers with no minimums. Or perhaps startups like ClickIPO will gain traction by offering a value proposition to underwriters.
Some Brokers Did Provide Access
A few times over the course of this IPO, I reached to investors on Twitter to see if anyone got access to the Snap IPO.
Only one reader confirmed he received an allocation. His shares came through TD Ameritrade. That reader received 100 shares at $17 before the Snap shares started trading. Awesome for him!
We also know that Fidelity provided access to its best customers (see right). From what I gather, Fidelity often offers shares to customers (I’m on their email list, but don’t have access yet), but actually getting shares is not as easy. They seem to provide access to their best customers first, then down the list. If you’re at the minimum, often there aren’t enough shares left.
Each time there’s an IPO like this, I like to ask investors to see who got access and where, so we can better understand how to get access.
So I’m requesting again in this post, if anyone received shares before the IPO, please let us know in the comments section at the bottom of the page. Please share all or some of the following if you’re comfortable:
- Number of shares requested
- Number of shares allocated
- Approximate assets in your account
Hopefully, we can grow our knowledge of what it takes to get access to these big IPOs. So when more large tech IPOs hit the markets, we’re informed on where our best chances are.
Congratulations to those who got shares of the Snap IPO. This was a big-time winner. Let’s hope it kick-starts many new IPO opportunities for 2017.
I focus on access to IPOs here, not the quality of IPOing companies. Snap has wide-ranging bull/bear arguments. Many analysts are calling to short the stock, while plenty of investors are optimistic long-term.
Today, traders are in control and volatility is high.
Access to the IPO has nothing to do with the quality of the company. So please don’t mistake a profitable IPO for long-term quality. You may recall the LendingClub IPO. Out of the gates, the stock soared into the high $20s.
Today, that stock trades below $6.
Remember, if you flip shares by selling in the first 30 days, your broker may limit your IPO access in the future. Something to keep in mind.
One unique feature of the publicly trading Snap shares is they carry zero voting rights. Instead, the founders of the company maintain complete control. Seems arrogant to me. If you want to put your faith in that kind of share structure, beware of the risks.
Once the hype is gone, Snap will be a highly-scrutinized stock on a quarterly basis. If they don’t deliver, watch out below.