Snap’s stock has left a bunch of millennial investors under water

YOUNG people who bought “ridiculously” overpriced shares in Snapchat because they like the app have been taught a hard lesson.

IF YOU’RE under water on Snap shares since the company went public, there’s a pretty good chance you’re a millennial.

The stock of Snapchat’s parent company has been on a rollercoaster ride since its market debut last week, surging more than 70 per cent from the initial public offering price in the first two days of trading and plunging back down by a quarter since.

Some seasoned investors have been wary of the volatile, relatively high-priced stock of a company that has yet to report a profit. But novice investors said their deep affinity with the disappearing-message app prompted them to jump in.

“I bought it even when I was pretty positive I would not make a profit in the short run, but just because I am a fan of the product,” said Chris Roh, a 25-year-old software engineer in San Francisco, who has only been trading stocks for about a month on Robinhood, a mobile trading app popular among millennials.

Roh said he bought the stock on that first trading day at $US25 a share.

Trading activity on Robinhood jumped by 50 per cent on the day of Snap’s debut, with more than 40 per cent of those who traded that day buying Snap shares. The median age of Snap shareholders on the platform was 26, the same age as Snap chief executive Evan Spiegel, according to Robinhood.

Snap sold shares at $US17 apiece in its IPO on March 1. The day after, on the first day of trading on the New York Stock Exchange, the stock popped as high as $US26.05. Snap’s surge extended into the second day of trading, March 3, when its stock went as high as $US29.44.

The shares have sunk 25 per cent since, however, closing Friday at $US22.07. On Monday, they were recently off 2.2 per cent at $US21.58.

Kaleana Markley, a 29-year-old human resources consultant in San Francisco, bought Snap shares as her first stock market investment.

“Snap just felt like the IPO of my time and seeing where Facebook and Amazon are now, I really think Snap has the potential to grow [like them],” said Markley, who bought the shares through Stockpile, another online brokerage aimed at millennials — generally defined as people reaching young adulthood in the early part of this century.

Markley said she bought some shares in Snap on the first day of trading and some more on the second day, when the stock hit the highest level of its short lifetime.

“One of the non-fundamental reasons driving the stock is that many millennials purchased Snap shares at inflated levels due to their preference for the product,” said Shebly Seyrafi, managing director at FBN Securities. “That is, not due to a real understanding of the number or valuation.”

Snapchat’s users, mostly in the 18 to 34 age range coveted by advertisers, spend an average of 25 to 30 minutes on the app and visit it more than 18 times a day, according to the company, making it more visited than any other social media platform.

“Snap is tapping into the pride of ownership [for millennials] which we don’t see often in the stock market,” said Dan Schatt, chief commercial officer at Stockpile.

Snap’s IPO gave Stockpile its biggest single day since it launched in 2015, nearly 10 times the service’s daily average in transaction and sales.

On StockTwits, a Twitter-like platform for sharing trading ideas, where 40 per cent of users are between the ages of 18 and 34, Snap has been the most talked-about stock for days.

There are concerns about slowing user growth and competition from Facebook. The overall sentiment on the stock is now 44 per cent bullish and 56 per cent bearish, compared to early February when bullish sentiment was 100 per cent, according to StockTwits.

This article originally appeared on New York Post and was reproduced with permission.