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Will Snapchat Trigger More Tech IPOs?

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By William Vogeler, Esq. on March 03, 2017 10:57 AM

You know how some parents will break the bank to buy Christmas presents for their kids?

And despite any suggestion that Christmas is not really about money, kids are the driving force behind the buying frenzy?

Well, it's Christmas for Snapchat, and the kids who are making it happen. The tech company has gone public, and its shares jumped from $17 to $24 apiece at the opening.

While the story is far from over, the company is poised to beat projections in its initial public offering. The next question is whether it will trigger more tech IPO's.

Waiting for the Millennials

Los Angeles is already preparing for the next wave of tech millionaires and billionaires. Snapchat, based in nearby Venice, is clearing the way. The fact that it came out strong is a good sign that other tech companies may see similar success. This may indeed trigger more tech IPOs in the near future.

"When it comes to tech companies, for the wealth managers and real estate guys, no one has really rung the register like the Snap thing that's about to happen," said Blaine Lourd, whose wealth management firm is based in Beverly Hills. "My theme is that Snapchat is the moment."

Evan Speigel, the 26-year-old co-founder and CEO of Snapchat, has already arrived. After the IPO, he will be worth about $5.7 billion. Not bad for a day's work.

Like Speigel himself, Snapchat users are predominantly millennials and younger people. If you are over 35, you may have heard of the application but probably never used it.

Kids Can Buy Stock, Too

According to studies, millennials generally don't invest. Only one in three own stock. But when Facebook went public in 2012, the younger buyers came out. The stock has risen as much as 250% since then.

"We saw a lot of adoption from the younger generation," said Nicole Sherrod, managing director of trading for TD Ameritrade. Millennials "invest in what they know about, and are heavily skewed towards tech, because they use these products."

Twitter, on the other hand, was a relative bust. Its stock has dropped 28 percent since its IPO in 2013.

Stock watchers -- and private tech companies -- are waiting to see what happens with Snapchat. With its popularity among younger users, they want to see if it will attract younger investors also.

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