The App That I Still Don’t Understand is IPOing

It used to be music that instantly classified you as “old”, with me it appears to be this app.

Snapchat has finally revealed plans for the much publicised IPO…..

And there’s one sentence that says everything about Silicon Valley IPO’s. You’ve read it a thousand times probably but here Snapchat were pretty plain about it.

“to incur operating losses in the future, and may never achieve or maintain profitability”

Which is about as wide open as you can get. The IPO therefore has the single purpose, as other Silicon Valley IPO’s tend to, recoup the money for the initial investors. There’s 24 of them… the idea of buying shares as investment is thinking that over the long term that the company will be striving to make a profit for the shareholders and therefore paying a dividend in the future. A company claiming it won’t make a profit to traditional shareholders is…..

The hope then is the share price is more than what you paid for it and sell it on.

And if you think the unicorn eye-watering valuation of $25 billion is impressive then the loss figures are equally sphincter tightening. You can also see this in Uber, Lyft and other media luvvied ventures. These aren’t businesses, they’re planned investor flip schemes where profit isn’t a measure, just a bonus. The focus is on the IPO.

What is Business?

If you need a reminder.

“Business is a very specific, limited activity, whose defining purpose is maximising owner value over the long term by selling goods or services.  Accordingly business is not an association to promote social welfare, spiritual fulfillment or full employment; such organisations are legitimate, but they are not businesses” Elaine Sternberg – Just Business – Business Ethics In Action

I’m just wondering if the buyers of Snap shares will be left with a donkey, not a unicorn once the original investors have cashed out. It’s a well documented approach, hardly new.