Now that we're one step closer to finding out when Snap Inc. will go public, the next milestone to look towards is the Snapchat stock options listing.
Snapchat formally filed for its IPO "roadshow" last Thursday. This is when the issuers of a stock present their case to potential buyers. The goal is for the issuing banks to presell the stock to institutional investors. The process usually takes at least 15 days.
After the roadshow ends, the company will be publicly available the next day of trading.
Once Snap Inc. shares are available to the public, it will have to meet five criteria to be considered for the options exchanges...
What It Will Take for Snapchat Stock Options to Be Listed
The Snapchat IPO should take place within the next month. It is a highly anticipated IPO, so it's likely we will not have to wait long for the following five criteria to be met. Once these criteria are met, the Chicago Board Options Exchange (CBOE) will be able to review the stock to determine if it will list options contracts for Snapchat stock.
Here is the criteria to be listed on the CBOE:
- The stock needs to be listed on a major American exchange. The most popular are NYSE and Nasdaq. Snapchat applied to be listed on NYSE.
- At least 7 million shares need to be available to the public. This excludes employee shares or founder/company-controlled shares because those are not available to be bought and sold by the general public.
- There need to be at least 2,000 shareholders. Again, the company, employee-owned stock, and founder stock are not included in this number.
- The stock must trade above $3/share for five consecutive days. Given the media coverage of Snapchat's IPO along with filing for $3 billion, that share price should be easy to hit.
- The last component is an average daily trading volume above 200,000. In order to be considered for an options listing, the stock needs to be highly liquid. The built-up anticipation should help Snapchat stock crush the volume requirement.
Based on the above criteria, you will have to wait at least five trading days for Snapchat stock options to be available. This assumes that the CBOE approves the stock for options listings the first day it is eligible.
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Even if Snapchat is eligible to be listed with the CBOE in the first five days of trading, it is likely the exchange will take longer to decide when options will be available. The CBOE usually waits at least a month before listing stock options.
There is an exemption to that rule though, as we saw with Facebook Inc. (Nasdaq: FB). There was such a high demand for options that it was listed by the CBOE just five days after its IPO.
We will have to wait and see if Snapchat stock options get listed as quickly. In the meantime, check out our guide of everything you need to know about the Snapchat IPO.