Snap Incorporated, the popular photo messaging company, debuted for public trading on March 2, 2017.
The stock saw a huge spike in demand during the first day and closed at $24.48 - roughly 44% above the initial public offering (IPO) price of $17.
However, the stock has slumped in the wake of the IPO, and six trading days later closed at a price of $22.07, giving back nearly 10% over that period.
The popularity of SNAP, combined with its relatively large market capitalization (approximately $24 billion with stock here), catalyzed a relatively quick listing of the options. Options trading for SNAP launched on Friday, March 10th.
Prior to the release of SNAP's options, an episode of Options Jive on the tastytrade financial network focused on the newly listed company and the trading behavior of some peers (FB and TWTR) when options were first listed in those names.
Although SNAP had a larger market capitalization on its first day of trading than it does today (~$33 billion versus ~$24 billion), the graphic below illustrates that SNAP already has plenty of financial wherewithal even when compared to a great many companies in the S&P 500:
Looking at early trading activity in Facebook and Twitter after their respective IPO's (and ensuing listing of options) provides additional context.
Facebook (FB) first traded publicly on May 18th, 2012 when underwriters sold shares for $38/share. While FB touched $45 during its first day of trading, it ultimately closed the day almost right at its IPO price - $38.23.
The stock then slumped significantly and proceeded to lose ~29% of its value over the next six trading days (as compared with a drop of 10% in SNAP over its first six trading days).
Looking at Twitter (TWTR), one can observe an even bigger surge on the first day of trading than SNAP, but far less volatility in price movement over the next six trading days. Underwriters priced the TWTR offering at $26, which turned out to be well under where the broader market valued the company.
Demand for the TWTR IPO was raging hot and pushed the stock to a high of $50.09 before ultimately closing $44.90 on its first day of trading (a jump of almost 72% over the underwriter price).
Over the next six trading days TWTR's movement was far more muted than that of FB and SNAP, despite the bigger pop on day one. Twitter stock closed down only 2% lower after six days of public trading.
“Six trading days after the IPO” is referenced above because in each of the three cases (SNAP, FB, and TWTR) trading in their options kicked-off on the sixth trading day after each went public, as shown below:
SNAP IPO March 2nd, 2017 (SNAP options listed March 10th, 2017)
TWTR IPO November 7th, 2013 (TWTR options listed November 15th, 2013)
FB IPO May 18th, 2012 (FB options listed May 29th, 2012)
The following data may also be of interest to traders considering positions in SNAP.
Stock performance of SNAP, FB, and TWTR over their first 7 trading days (includes IPO and listing of options):
SNAP: down approximately 10%
TWTR: down approximately 2%
FB: down approximately 29%
And for further context, here is the stock performance of SNAP, FB, and TWTR during the 30 trading days after options were first listed in each symbol:
SNAP: (data not yet available)
TWTR: up approximately 45%
FB: up approximately 7%
Interestingly, both SNAP and TWTR closed their first day of trading with almost identical market capitalizations of approximately $32-33 billion. FB was of course much larger weighing in at around $80 billion on day one of public trading.
Currently, Facebook’s market capitalization is closing in on $400 billion, while Twitter’s has slumped to $11 billion.
It’s possible the drop in TWTR’s value over the last couple years has affected traders’ perception of SNAP in the aftermath of its IPO. Looking at the open interest in January of 2018, the larger volume is certainly skewed toward the downside puts.
As mentioned on Options Jive, the large move in TWTR’s stock price over the first month of trading may also serve as caution to traders considering positions in SNAP options - at least until more data is observed/collected.
If you have any questions about SNAP options, or any other trading-related topic, we hope you’ll reach out at firstname.lastname@example.org.
We look forward to hearing from you!
Sage Anderson has an extensive background trading equity derivatives and managing volatility-based portfolios. He has traded hundreds of thousands of contracts across the spectrum of industries in the single-stock universe.