Category: Economy (page 1 of 25)

What You Need To Know About The “Snapchat” IPO

One of the most anticipated IPO’s is finally happening – SNAP will go public in an effort to raise up to $3 billion. The company is best known for its messaging app Snapchat, which is primarily an image sharing network. It’s hugely popular among younger people. Of the estimated 50 million Snapchat users, the median age is 18. In fact, teens seem to be opting for it over Facebook, whose average user’s age is closer to 40. The app was started by Stanford University classmates Evan Spiegel, Bobby Murphy, and Reggie Brown back in 2011. Its original purpose was to be a selfie app, which allowed users to share images that were only available for a very short amount of time. The purpose of having the images only be temporary was to encourage users to continuously create more content, thereby engaging with the app more often. However, they came up with the idea after Brown told Spiegel about a picture he wishes he hadn’t sent someone. Brown outright said he wished there was an app that would allow you to send “disappearing photos.” Spiegel decided it was a genius idea and immediately recruited Murphy to help them develop their new app. It was first called Picaboo, but two months after its debut, they relaunched it as Snapchat. It has since evolved into a combination of private messaging app and shared public content platform. The service completely confounded the potential investors the y originally approached. No one could fathom why the public would want to send disappearing photos. And it certainly was not an instant hit – before relaunching as Snapchat, the Picaboo app only had 127 users. It was about that time that the three founders had a falling out, which ended in Brown leaving the company and Spiegel and Murphy having to roll the app out under a new name due to a name conflict with a photo-book company. It took some high school kids to figure out how to make Snapchat an app that people actually wanted, though. In the fall of 2011, the company noticed that usage peaked between 9 a.m. and 3 p.m. among users at an Orange County, California high school. Spiegel’s mother had told her niece about the app, and she and her classmates quickly embraced it as a way to pass notes during class. The magic for them was that it left behind no evidence. By spring of 2012, it had spread to even more schools and users had surged to over 100,000. Shortly thereafter, a $425,000 investment from Lightspeed Venture Partners’ Jeremy Liew allowed Snapchat to expand their infrastructure, bringing the company’s valuation to around $4.25 million. Now, the company is estimated to privately be valued at $17.8 billion. Investors expect the public offering could lift that valuation to as high as $25 billion – that’s a 62x price-to-sales ratio. For comparison, Facebook’s ratio is just 13x. As of the end of 2016, Snap reported its service had 158 million active daily users, with an average of 2.5 billion “snaps” created on the app every day. Interestingly shares will be nonvoting stock, meaning investors won’t have any ability to influence the company’s direction. Regardless the young inventors of Snapchat are about to see their wealth skyrocket. From what I understand Spiegel and co-founder Robert Murphy each own 21.8% of the Class A stock, and the public offering will officially make Snap’s cofounders a couple of the world’s youngest billionaires. The company will trade under the ticker “SNAP” on the NYSE.

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The “Art” of Price Discovery…

I always remember famed Wall Street floor trader Art Cashin telling some of his favorite stories. One that has always stuck in my mind and has again resurfaced coming to me via e-mail from a few friends, is an awesome tale about “price discovery” involving two of our nations most famous business titans. As many of my friends in the trading world like to say, our Universities are filled with books and professors who are trying to elaborately explain business when perhaps we can learn the most from our ancestors and the stories associated with their great success. So the story goes… The two main characters of this timeless tale are Charles Lewis Tiffany (The famous Jeweler) and John Pierpont Morgan (JP Morgan).

Being the astute jeweler that he was, Mr. Tiffany knew that Mr. Morgan had an acute affinity for diamond stickpins. One day, Tiffany came across a particularly unusual and extraordinarily beautiful pin. As was the custom of the day, he sent a man around to Morgan’s office with the stickpin elegantly wrapped in a robin’s egg blue gift box with the following note:

“My dear Mr. Morgan. Knowing your exceptional taste in stickpins, I have sent this rare and exquisite piece for your consideration. Due to its rarity, it is priced at $5,000. If you choose to accept it, please send a man to my offices tomorrowwith your check for $5,000. If you choose not to accept, you may send your man back with the pin.”

The next day, the Morgan man arrived at Tiffany’s with the same box in new wrapping and a different envelope. In that envelope was a note which read:

“Dear Mr. Tiffany. The pin is truly magnificent. The price of $5,000 may be a bit rich. I have enclosed a check for $4,000. If you choose to accept, send my man back with the box. If not, send back the check and he will leave the box with you.”

Tiffany stared at the check for several minutes. It was indeed a great deal of money. Yet he was sure the pin was worth $5,000. Finally, he said to the man: “You may return the check to Mr. Morgan. My price was firm.”

And so, the man took the check and placed the gift-wrapped box on Tiffany’s desk. Tiffany sat for a minute thinking of the check he had returned. Then he unwrapped the box to remove the stickpin.

When he opened the box he found – not the stickpin – but rather a check from Morgan for $5,000 and a note with a single sentence – “JUST CHECKING THE PRICE.”

I just love this story as it shows us we always have to be”thinking”… Please share with the kids. Good Stuff!

This is just a small excerpt of the full Van Trump Report that I send out every day. To find out what you’re missing, sign up for a FREE 30-day trial.

Trump’s Presidential Win Adds A Slew Of New Moving Parts

“Make America Great Again” rings through the headlines and the investment world takes several steps back in disbelief as they witness the biggest political upset in U.S. history. I hate to say I told you so… but I told you so!!! I’ve said time and time again, “expect the unexpected and never doubt Americans propensity to stir the pot and deliver change.” A good friend once told me that we are a nation of Hypo-maniacs, a nation of massive risk takers, it’s in our blood, and with that our reactions can be extremely unpredictable. The American people have spoken and the “establishment” as we know it has been turned upside down. The cards have clearly been reshuffled. I’ve been extremely patient and very conservative with my investment portfolio during this entire process… I’m sticking with the same simple play-calling and counting to a very long “three-Mississippi” before I make my next move. I want to eventually be a buyer but on a much larger break because I believe in the American economy, but I see no reason to get in a hurry at this juncture. Be smart, there’s a massive number of new players running onto the field and its going to take some time for the odds makers to learn how they play the game. Does the U.S. dollar continue to weaken as global investors become uncertain about our future? What happens to Janet Yellen and the Fed? What happens with the Supreme Court? What happens to the Speaker of the House? What happens to the IRS? What happens to government spending? What happens to trade deals and foreign relations? Bottom-line, there’s still a ton of unanswered questions. I continue to stay conservative. I suspect there will be a lot of things written about the “polls” and the self-proclaimed brainiacs who thought they had the election results figured out. Again, I challenge their ability to filter the massive wave of “noise” that we now have constantly in our ear. Technology is amazing in many ways and our access to it wonderful, but it has also made the “noise” that much louder and ultimately more difficult to hear the “music.” Rember it’s not the data that is to blame “KMIGAAARAEMEECRT” but much more about how people are going about interpreting it “MAKE AMERICA GREAT”.

Retailers Are Desperate For U.S. To Help Resolve Hanjin Shipping Crisis

The National Retail Federation and other U.S. trade groups are urging the Commerce Department to work with the South Korean government to resolve the Hanjin Shipping Co. crisis, which stranded an estimated $14 billion of goods at sea. Last month’s bankruptcy of Hanjin, which moves huge containers of products to the U.S. from Asia, has roiled supply chains and delayed shipments of everything from T-shirts to televisions. Much of the cargo is what retailers are counting on to stock their shelves for the holiday season, by far the most important time of year for consumer spending. Companies also are concerned about cargo stranded at overseas ports, according to the letter. And they’re facing increasing freight charges as they seek alternative transportation options. The Hanjin Group seems to be hoping the South Korean government and/or banks will come to its rescue. Other than their initial announcement to put US $ 90 million into getting their ships and their clients containers released, the Group continues to offer the same financial packages the creditors that has already been rejected twice. Overall, Hanjin has 81 vessels arrested, detained or embargoed worldwide. Both the Suez and Panama Canals have refused transit to Hanjin vessels and fears are growing that these cargoes will remain stranded for an extended period of time. Exactly what the U.S. commerce Department can do to help the situation is not entirely clear, however. They don’t have the power to mandate shipping rates and they it is highly unlikely they are in a position to guarantee payment to Hanjin’s creditors. As one industry newsletter put it, Hanjin may end up being the Grinch that steals Christmas from U.S. retailers this year.

Will It Really Be Different This Time Around?

Stock markets started the week coming off an impressive run that saw the Dow, Nasdaq and S&P 500 all hit new record highs. Many market insiders are worried that these record high stock valuations simply aren’t justified, especially considering the current economic environment and overall lack of global growth. Remember, even though second-quarter corporate earnings here in the U.S. were better than expected, it was still the fifth consecutive quarter of overall declining numbers. That’s what makes it hard for so many to believe that stocks across the board here in the U.S. are making fresh new all-time highs. In fact the “trifecta” set last week of the Dow, Nasdaq, and S&P 500 brought back memories of the dot-com bubble of 1999, which was the last time all three major U.S. stock indexes hit all-time highs in a single day. The bears are quick to remind that a little over two months later, the bottom dropped out and it took the Nasdaq 15-years to regain all it lost in the meltdown. On the flip side, this time around the bulls point to some very distinct differences. The chart below from the The Wall Street Journal shows the insane rise the Nasdaq experienced in 1999, moving up an astounding +66%. It’s gain of just +4.4% this year is obviously far from the “irrational exuberance” of that boom and bust.

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