Snapchat, which says it may never make a profit, is valued at $24 billion after a $3 billion IPO

The company says it "may never achieve or maintain profitability," but Wall Street doesn't care

Published March 3, 2017 5:30PM (EST)

Snapchat CEO Evan Spiegel (AP)
Snapchat CEO Evan Spiegel (AP)

Snap, Inc., the parent company of popular picture messaging app Snapchat, went public on Wednesday, raking in over $3 billion in its IPO.

The stocks, which began trading on the market Thursday, offered 200 million shares initially priced at $17 each, putting the company's market value at about $24 billion.

Trading closed at the end of the day at $24 per share, but reached a high of $26.05, giving the shares an overall 44 percent increase.

While Snapchat's debut was triumphant, many tech and social media companies don't usually get the same results. Facebook's first day on the market showed higher stock prices ($42.05 per share) but came back with an 11 percent increase. Twitter, which debuted with shares priced at $26, had a similar first day to Snapchat.

People around the country who took an interest in Snapchat early were able to cash in on their investments, including a high school in California. Saint Francis High School in Mountain View, California, was one of Snapchat's first investors, taking $15,000 from their endowment in 2012 to invest in the startup. On Thursday, the high school sold 1.4 million shares (two-thirds of its initial investment) raking in nearly $24 million.

The overwhelming surge of buyers and high stock prices was surprising to many. For one of the biggest social media networks in the world, with almost 160 million daily users, Snapchat draws a staggeringly low amount of revenue — the company, which began operations in 2011, never once turned a profit.

"We have incurred operating losses in the past, expect to incur operating losses in the future . .  . and may never achieve or maintain profitability," the company said in a recent S-1 filing.

The company's reported losses have surpassed half a billion dollars over the past three years. Snapchat makes some money from ads, and their newly released special glasses, Spectacles — though the product hasn't made much of an impact on the bottom line.

The company not only has no profits, it has no home. CEO Evan Spiegel, 26 is known for running the company the way he wants, gaining him a reputation for being controlling and arrogant. Spiegel is poised to become one of the youngest self made billionaires in the world.

Despite a decline in users, no revenue to speak of, no headquarters, new competition entering the market and an extremely young CEO, Snapchat doesn't seem to be going anywhere. Many social media experts report that the app may soon gain the popularity of Facebook, with younger generations preferring it over the curated feel of other apps.

By Katie Serena

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