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NEW YORK, N.Y. /Troy Media/ – Millennials have finally joined the grown-up world of investors and stock speculators. The generation known for its rejection of traditional norms – and its distrust of Wall Street generally – has enthusiastically jumped into the world of high finance with both feet.
Whether those feet are firmly planted on the ground is highly in doubt.
The recent initial public offering (IPO) of Snap Inc. saw among its initial investors a high proportion of millennials. No surprise there. That’s the generation that most uses Snapchat – which is basically all that Snap has to offer.
So, at the risk of being a total buzzkill, let’s review the financial realities of that IPO to see how quickly millennials forgot about their much-ballyhooed values of fairness and inclusion once they were seduced by the prospect of quick riches.
Co-founders Evan Spiegel, 26, and Robert Murphy, 28, are entitled to 10 votes per share, which gives them the ability to control all matters sent to the shareholders for approval. Despite that rather dictatorial quirk in corporate governance, it pales in comparison to how individual investors – i.e. wide-eyed millennials – got willingly fleeced by the Wall Street system.
Snap made an initial public offering of its shares on March 1 at $17. However, the offering price of a stock is not the same as the opening price of a stock – the price of the stock when it’s first available to be traded and bought by ordinary and individual investors. That opportunity usually comes on the day after the IPO.
Snap’s opening price was $24 – or a staggering 41 per cent over its offering price of $17. It has steadily fallen since the second day of trading to where it sits now – around $20 as of this writing.
So who got to buy stock at the IPO price of $17? Like many things in life, that golden opportunity was reserved for the well-heeled and connected – specifically, large institutional investors who buy in blocks of hundreds of thousands or millions of shares. You know, the very institutions blamed for the meltdown of 2008 that almost brought the world economic structure crashing down.
Millennials don’t like those institutions as a rule, which is why they flocked in great numbers to Bernie Sanders in the 2016 presidential race. A central piece of his platform was a call to reform Wall Street and break up the largest too big to fail banks and financial institutions – the same ones that gorged on Snap’s IPO.
Robinhood, a mobile trading app popular with millennials, reported that the median age of those buying Snap stock was 26. Their interest caused Snap stock to spike on its second day of trading to $29.44, which will in all likelihood be a plateau the stock will never reach again.
Institutional investors who bought at $17 guessed correctly that the stock would surge on its first day of trading due to millennial interest. They were able to do what all of us would like to do – buy stock low and sell high.
In other words, buy the stock on Day 1 and sell a percentage of the stock on Day 2, thus financing your initial Day 1 purchase and pocketing the difference as profit. Gordon Gekko, the uber-greedy trader at the centre of the movie Wall Street, would be smiling.
And who did they make their money off of? Millennials, of course. They walked into the trap like bees flocking to a pot filled with imaginary honey.
If millennials get rich off Snap – when it either grows much bigger than logic suggests it can or is bought out for an inflated price by a competitor – then more power to them.
Whatever the outcome, it’s interesting to watch millennials learn what it’s like to have a personal stake in the day-to-day financial world of Wall Street.
For the record, I think millennials who bought Snap in the mid-to-high-$20 range will see their money disappear like the images for which Snapchat is famous. Such a calamity would likely leave them disaffected, defiant and accusatory.
But it’s hard to imagine millennials acting like that.
Troy Media columnist Gavin MacFadyen is a Canada-raised, U.S.-based writer and occasional lawyer. Blending insight and wit, he brings a unique perspective to the issues of the day. Gavin is included in Troy Media’s Unlimited Access subscription plan.
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