Thursday, March 2, 2017

Oh, SNAP!

For the record (if there is one) I don't have a lot of money.  What I do have is working as hard as possible so that I can have money later. That's called "putting your money to work for you."  Besides paying bills and doing what I refer to as "living," I invest as much as I can, to the extent of what I call "Saving Myself Broke." I don't take vacations or buy a lot of extravagant things.  The most expensive thing I do is buy prescription food for Thor.  He seems to appreciate it.

Anyway ... Our stock market made a major thrust forward yesterday, and it seemed that the time was ripe to sell a stock that I had held for a while but seemed stalled in its own growth - Activision/Blizzard ATVI.  I profited from the sale, and like all my sales, I immediately began to think, "What's next?"  Even at my advanced age, I'm still in growth-stock mode.

I figure on living at least another 30 years, and if you think about how much the landscape has changed in the last 30 years, there is no reason to be in bonds (boring) or cash (no interest) so my focus is still on growth stocks, and nothing is growing faster than any Internet-based business (Amazon, Facebook, Netflix & Google) or companies that provide services for them or the companies that make the chips that power the stuff.

One such company came public today - commonly known as Snapchat - the parent company SNAP began trading today.  Coincidentally, I had some cash on hand. Normally, I don't invest in things like this.  However, I channeled my inner George Costanza and decided to go with "The Opposite," and take a shot.

The problem came with the offering and how I was to go about getting any. From all accounts, the offering was twelve-times over-subscribed, which meant that the shares that were offered had 12 times as many buyers as they had shares available.  I had heard that only institutional (Mutual Funds and banks) buyers would have a shot at it.  Nevertheless, I proceeded.  Analysts on CNBC said that the stock would begin trading about 2 hours after the opening bell, and that the range would be between $23.50 and $24.00 a share - well above the IPO pricing of $17.

It's common for IPOs to begin trading above their offering price.  Once the institutional buyers get their $17 shares, they need to go back to the market to fill the rest of their orders.  That drives up the price to what I am, which is a "retail investor."  I am the smallest of the small, so I thought that my chances to get in were slim and none.  Nevertheless ... I placed an order in my IRA for 100 shares at $24.  For IPOs, one has to make a "Limit Order," specifying a price.

Going by what CNBC had said, I placed my order at $24.  I felt like I had purchased a lottery ticket - and felt like I had the same chance as winning.  After all, what shot does a small-timer like me have to get in on the biggest IPO since Alibaba went public in 2014? A good chance, as it turns out.  I got my shares about a half hour after the order.  It was a big rush, and since I don't have sex, I can say that the feeling was better than sex.  At the end of the day, the stock finished the day at $24.48, which is a small victory for small investors.  It held onto its initial offering price.

Now, onto the risk. It trades at 35-times sales (almost twice what Facebook did in its IPO) which is expensive, and to say the company hasn't made any money yet is an understatement.  When Facebook went public, it was a more mature company.  The hope here is that the money that SNAP raised from their IPO will be put toward building a user base and making it into what they say it is - a "Camera Company."  Time will tell, of course.

Most analysts have placed "Sell" ratings on SNAP and assigned price targets between $10 and $17.  There's no revenue growth, users are declining, and it's an overpriced stock.  Fuck them, I say.  They probably said the same things about Facebook and I know they said the same things about Netflix. I don't know what the future holds for SNAP.

If I did, I wouldn't be working for a living.  What I can say is that nobody ever succeeded without taking a chance.  This seems to be the ultimate chance.  The question I asked myself was, "If you could risk $2,400 and potentially make twice that, or lose it all, what would you do?"

The answer I gave myself was, "I'd risk it."  I felt like the confluence of available cash and the prospect of investing in a true growth company don't come along often, and I needed to take this chance. Either it works out, and my retirement is easier or - it doesn't work out and my retirement is as difficult as I envision it to be.

Either way, I win.

1 comment:

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