If I were a tech venture capitalist, which sadly I am not, the pummeling that Snap Inc’s (NYSE:SNAP) stock has gotten since it’s much-hyped IPO last month would be scaring me to death.
I mean if Snap, which allegedly is the best thing to hit social media since Facebook Inc (NASDAQ:FB), can’t gain traction, then what chance do other so-called “Unicorns” such as Uber, Pinterest and Airbnb have as public companies?
Snap didn’t do its brethren any favors by offering shareholders stock with zero voting rights, which must sting shareholders almost as badly as the company’s $514.6 million net loss in 2016. To make matters worse, Snap even warned investors that it might never earn a profit.
No wonder SNAP stock has slumped more than 15% since its IPO, and Wall Street analysts can’t slap “sell” ratings on the stock fast enough.
Why SNAP Spells Trouble for These Unicorns
Since most of the unicorns are either marginally profitable or are deep in the red, most are probably looking at going public with the same attitude I have about skydiving — why leave the comfort of a perfectly good plane?
Let’s consider the case of Uber. Not only did the ride-hailing service reportedly lose more than $3 billion last year, but its CEO Travis Kalanick is getting headlines for all the wrong reasons such as getting into pointless arguments with drivers and the company’s rampant sexism.
Kalanick, who dubbed his company “Boober” because of his success with the ladies, recently vowed to grow up and to become a better leader. He has no choice. Large institutional shareholders have little tolerance for “wacky” CEOs who lose money, especially one that has an insane $60 billion valuation.