Snap Inc. (NYSE:SNAP) goes public tomorrow, and millions of investors are waiting with baited breath to buy shares of what could be one of the biggest technology-related IPOs of the past several years with a valuation that could hit $30 or even $40 billion.
Only problem is, companies like Snap are called "unicorns" for a reason – they're fantasy.
Which is why I've got a far better and potentially more profitable alternative for you today.
You'll never hear Wall Street analysts pitch this backdoor entry.
What Snap Hopes You Miss in Its S-1 Registration Statement
Most investors are familiar with the term "unicorn," and not because they read children's books.
Unicorns are what Wall Street calls private startup companies valued at $1 billion or more. Once the stuff of myth and legend, today "unicorns" like Uber, Xiaomi, Airbnb, and, of course, Snap seem to fall off trees.
You'd think unicorns are a license to print money based on how Wall Street pitches them to the investing public in highly choreographed "road shows," but sadly that's not the case.
Like their mythical counterparts, unicorns are complete fantasy masquerading under the guise of a legitimate investment opportunity. When you look deeper, they are little more than an illusion intended to make a small group of founders, early investors, and investment bankers wealthy…
And it's a bad illusion at that.
Take Snap's S-1 Registration Statement, for example.
An S-1 is a filing required by SEC for any company that wants to go public. It's the investing public's first opportunity to review a unicorn's financials and other critically important data that insiders have known for years.
I call S-1s "anti-marketing marketing documents" because they highlight all the reasons why you don't want to invest – especially when it comes to a company like Snap Inc.
Naturally, Wall Street's investment bankers – who stand to make hundreds of millions on the deal – hope you'll never pick one up.
Instead, what they want you to concentrate on is the "potential" associated with five years of mainstream social usage, the hype associated with telling stories through pictures that disappear, and the fact that the company has a "gee-whiz-bang" set of funky filters and glasses called Spectacles that will let you document life.
They're also hoping to play up the fact that Snap CEO Evan Spiegel famously refused a $3 billion offer from Team Zuckerberg. The implication, of course, being that Snap is somehow worth far more than that.
Don't believe it for a New York minute.
Initial public offerings like this one are the world's greatest shill game. Silicon Valley is very much in cahoots with Wall Street, and both want to set you up as the patsy.
I have a hard time taking a company seriously when the S-1 it's filed references sexting, selfies, and party-goats as formative influences, something company lawyers clearly tried to obfuscate by stating they knew that Snapchat "was being used …
Join the conversation. Click here to jump to comments…
About the Author
Keith Fitz-Gerald has been the Chief Investment Strategist for the Money Morning team since 2007. He's a seasoned market analyst with decades of experience, and a highly accurate track record. Keith regularly travels the world in search of investment opportunities others don't yet see or understand. In addition to heading The Money Map Report, Keith runs High Velocity Profits, which aims to get in, target gains, and get out clean. In his weekly Total Wealth, Keith has broken down his 30-plus years of success into three parts: Trends, Risk Assessment, and Tactics – meaning the exact techniques for making money. Sign up is free at totalwealthresearch.com.
So what is your take on the SNAP IPO yesterday?
About the same…lots of hype that will fade away quickly.
Best regards and thanks for being part of the Money Morning Family, Keith :-)
un grand bonjour…..merci…..
De rien, Said.
Merci de faire partie de la famille. Meilleures salutations, Keith :-)
And today??? Looks like you hit the nail on the head!
Thank you for noticing, Robert.
These things are always tricky but I like to think I've learned a few things over the years not the least of which is you never touch a hot stove…or a hype driven IPO.
Best regards and thanks for being part of the Money Morning Family, Keith :-)