Investors who buy into public offerings know it’s riskier to bet on a company with a shorter financial history. That’s why the IPO process is so critical: It’s the coming-out party when the company unveils why it’s worth owning the stock. Potential investors will come to Snapchat with more skepticism. The last major social media debut, Twitter Inc., generated a lot of excitement on Wall Street, but the company’s later performance proved that a popular, influential product doesn’t necessarily indicate long-term revenue and user growth.
“Investors learned their lesson with Twitter,” said Rett Wallace, CEO at Triton Research Inc., which analyzes Silicon Valley companies preparing IPOs. “They now know what metrics to ask about.”
