Groups to rebound in countries like yemen and pakistan. Global news. 24 hours a day. Powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. Technology is next. Caroline this is bloomberg technology. Coming up, snap, the big picture. Well get you up to speed on the trading day debut as a acid in the first ipo of the year. Plus, early believers, the first two they on snapchat. You hear from the partner. And the 5 billion club. How the monster ipo changed the fortune of the snap founders. First to our lead. Snap wraps up its first day of trading with shares closing up 44 from the listing price. They reached a high of over 26. The maker of the app and it a long tech ipo drought. What will be in the pipeline for other companies . Two people are joining us. How do they manage expectations. Much . A little bit too guest a typical ipo you would like to see 20 30 . This will have a little bit more buys baked in. If you look at twitter it was 70 or more on day one. Somewhere in between seems like they hit the sweet spot. When i look at trading and how the stock went around the 25 mark all day, it was fairly stable. There was not a lot of swinging going on. We sought to walk toward the end of the day down to the closing price. It seemed like a decent way to go out in your debut. No one is complaining about the returns for investors. Caroline looking at the ipo scoreboard, facebook is up triple its initial ipo value. After a year it was down 31 . Opened up its debut at 78 , then it was down 10 , now it is down 65 . It is worth remembering whatever happens on the first date is not always remain. Talk us through the managing of whereations and indeed the roadshow was not all smooth, there were some bumps they had 2iron server. 2iron over. Guest this is a company that is trying hard to not set up those comparisons to the companies you just compared it to, facebook and twitter. This is a company that does not want to be judged on its user growth, but it is going to be judged on its user growth. That is a metric that slowed in the Fourth Quarter. If you do not have the users, you cannot make the money of the ads. Snaps argument is that the User Engagement is so immersive and so frequent that it does not matter the quantity so much as the quality. Caroline 18 times being logged into the affidavit. Those are amazing statistics. We were down on the new york Stock Exchange. It was a frenzy. Goldman sachs had a role cut out for them. They were doing stabilization for the entire trade. They took their time. Guest they did take their time. That is what they are known for. Sawn tell you that you bobby and evan ring the bell. I was there for that. I chased him down because they went over to goldman to watch the first trades happened. They had to get there and work through that. The shares finally started trading at 11. 19. You can see they got open there. It was so important for them to find the sweet spot where they saw that the shares were there. You saw them priced at 17 a share even though the sources say the deal with 10 times oversubscribed. There is a reason that they could have priced in a little higher, but if you think about the companys impetus for pricing in at 17 instead of making it to our 2 million more and 18 a share, doing that rewards the shareholders who are willing to take a bet on them at the listing day and say look, we will give you a little bit extra wiggle room for your returns come even know we are not taking too much money off of the table. Caroline sarah, you are in silicon alley valley. So much is riding on this ipo and what it does in the next days, weeks, months, and years. There are many other companies waiting to enter the public market. How is this been ingested in Silicon Valley . Sara this is a highstakes ipo. There are so Many Private Companies that have ballooned in valuations into the billions. In some cases, tens of billions, Companies Like uber. People have been waiting for these companies to go public. Becauset been necessary theres so much capital available to them on the private market. And also, the markets were volatile. We are looking at the snap ipo, this is a big company the biggest social media ipo since twitter. They are saying, if they can do it, that shows there is an appetite on the market for these kinds of deals. Maybe for highly valued stock. Alex, youre talking to sources already, are they lining up already . Guest basically, yes. The average private company is now staying private for nine years. Snapchat is younger than that. That used to be the ammo for Companies Going public. They would go public when they were less mature. That has not been the case bs days. Snape is going against the grain by going out as early as it was. There been arguments in the past inr where the buy side equity markets has been very risk off. They want to see more profitability. They want to see more stability. Staff snap is coming off with an Unprofitable Company whose Business Model is six quarters old. The deal itself did well. Still . To about the longterm returns about where the stock goes and how the company stairs. This is a point where they are saying maybe things staying private forever is not necessarily the best thing, maybe having your judgment day in the Public Markets is just as good as doing a privately with basically the same investors. Like uber, airbnb. You also cover facebook. Questions that are being spell out there is can they do with facebook has been doing and have a vinegar bigger user base . Sure, they copied the story feature where people can create reality tv shows other like. This is a product people are using on instagram must as much as they are using on snapchat, or maybe even more at this point. This will continue to happen. Facebook has a chat cap, whatsapp, with more than one billion users around the world. It had a similar feature added earlier this year. Facebook is considering doing it too. This is a constant way of copying snap. It does harm the potential. We will never know how much faster they couldve grown if it was not for that. The company does not attribute their loss of growth to instagram, but it certainly is interesting. That,sitive side of advertisers say it is a little counterintuitive. Advertisers say they can justify buying snap ads because the format is not the same as as they can buy on instagram. Caroline it vindicates the Business Model to a certain extent. Great reporting for both of you throughout the day. Alex down on the Stock Exchange with me today. And sarah from san francisco. We will be coming back to you many times about snap going forward. Coming up, we continue to date into snaps her stay of trading. Just how much of a paycheck are they bringing home . We will hear from the Billionaire Team next. And the oneonone conversation with new york Stock Exchange president. When he had to say about snap trading debut. I take great comfort that the stock opened that 24 and is trading smoothly at that number. That is what you want on the first day. Especially the large ipo. Caroline more indepth coverage day. Aps first trading they added 1. 5 billion to the founders fortunes. Propelled the founders of more than 150 places on the bloomberg billionaires index. Us. Porter joins im looking at which go on the bloomberg terminal. Evan is now ranked 280, and bobby murphy joined 81. They have 5. 1 lean dollars. How is it being broken down . Reporter it is an incredible rocketship they are writing. Or 1. 7ey added 1. 6 billion to their individual fortunes. That is just when it was listed at 17 yesterday. All of a sudden in 2014, you get a 10 billion valuation of snap. Then it is close to 28 billion today. One of the alltime fantastic growth stories. The question is whether it will continue or not. Caroline how does rank in comparison to the rest of the tech billionaires out there . Reporter they are out there. Maybe jack dorsey from twitter, he only has 1. 5 billion. Caroline forgot. Reporter he has two jobs. The other is the start up unicorn head honcho, and in the airbnb three founders. And then just behind travis and garrett camp of uber. Bezos,ay behind jeff mark zuckerberg, and bill gates who are around 50, and 90 billion. Caroline talk us through it. That madehe founders a lot of money, but the Venture Capitalists who made a big bet in the early days. Reporter benchmark today made 900 million. Lightspeed ventures is a great story about how evan spiegel heided he would make sure had voting control of snap. They got 600 billion gained today. Caroline look at that 613 million. We are to be looking at my conversation with jeremy, one of the First Investors at Lightspeed Ventures. We tendut the balance to see on the first day . We know it is up 44 today. Twitter was up on its first day of trading. Reporter it does not point toward what is going to be happening in the last in the next year. Twitter was up, but now it is down. Facebook was pretty flat, and now it is up since its ipo. Is evan spiegel and bobby murphy fortunes changed in the founding of this company in particular. You are saying it was like a rocketship because it all set up so quickly. Is this now the point where they actually cash out . A lot of it will be locked in for the perceivable future. Reporter they sold 16 million shares in the offering. 272 million. You get tax on that, but they are looking about one to 80 million. As far as the shares, there are restrictions on where they can stop starts shelling. Abouteasier about each 20 each. No one can feel start for them. They have done very well. Im sure they will be celebrating area caroline i hope they will be. There will be champagne going around for all of those down around the new york Stock Exchange today. Flying back to l. A. Pretty exuberant. I urge you all to get onto rich go. Thank you. Apple is suing qualcomm for the second time this year. The suits were filed in the u. K. Courts in thursday. It alleges qualcomm charges royalty to companies. Apple is suing qualcomm in california. A 1 billion rebate for licensing fees. Apple alleges qualcomm is hoping that the money for punishment with korean regulators. Qualcomm says it will fight the charges. Plenty more on snap this hour, including interviews with two early investors. Next i will hear from a general capitalists partner. A member of Lightspeed Ventures who wrote the first check to evan spiegel. And a reminder that we have an interactive tv function, tv on the bloomberg. You can watch us live and also see previous interviews and dive into any of the bloomberg functions we talk about. This is for bloomberg subscribers only. This is bloomberg. We have all day long been bringing you interviews from snap investors who were there from the very beginning. Interviewedolleague a managing director. He gave his thoughts on the companys first day of trading. It is a reflection of two things, one is how popular the product is and how well the company has executed over the last two years. The second is that there have not been a lot of Technology Ipos and there is a strong investor demand to invest in Companies Like now. It is great to see. Reporter look at how the stock is trading right now, 25 and change around 26. Where do you see it closing and where do you see it trading in the quarter from now . I cannot see the future. What i can, on is that the company has done a good job setting expectations at the right level. You seeing strong Investor Sentiment behind the company. Every decision they are making is for longterm. What happens in the next few days is hard for me to protect predict. But so far so good. I asked that because you can go the way of facebook we do not have a great debut, but the stock can do very well. Or twitter which did better, but then fell below the ipo price. Thatis your confidence evan spiegel and bobby murphy can guide snap to avoid going the way of twitter . This is the key question that everybody talks about here. The reality is that every company is very different from each other. Twitter is still be 140 character function. It is very different from what snap done, which is communication in the everyday life. There are hundreds of millions of people that use it. Multiple times from 1020 times a day. I would say i look at evan spiegel and bodies bobby murphy how they executed over the past two years. That is a testament to how different the company is from twitter and even facebook. When they went public it was one product. Snap has launched a great communication out to redefine how to watch television on mobile. They have created an interesting brand that is interesting to advertisers. A lot of interesting innovations that come up of the company over the past two years. Reporter people were starting to question that ubiquity and lifespan of facebooks original basic product going on the social media network. The company has started to demonstrate it will create value and will require growth in many ways and expanded to different areas. When you look at the future for snap, along the lines of what we were talking about, d. C. The product changing a great deal, or the see them going into different businesses in different lines of products . Snap is a product first company. They have continued to innovate. I expect them to keep doing that in the future. They have described themselves as a Camera Company and focused on investing the next camera metaphor. Camera functions have not changed in a long time. Will they do acquisition . Hard for me to say. They have done small acquisitions in the past to bolster their product capabilities. Everything they have described themselves as is focusing on their own product. I see the continuing in the future as well. Said it is colleague a threetime leveraged short old people etf, but when you look at the audience is focused on, fickle millennials, the Market Capital is now above Deutsche Bank and others. Does the company like snap need to move beyond millennials to a bigger audience for instance their parents . Snap is a company that things about building mainstream products. They have launched products that have started with the millennials but a been designed to be mainstream. If you look at the number of half of their users are over 25 here it if you look at people over 25 that use the products, it is over 10 times a day. That is not a millennial only product, is very much mainstream. Reporter how long will you hold onto snap if it is not a Profitable Company . That is a difficult question. Had a pretty set methodology for how we exit companies months ago public. We distribute them over a certain amount of time. We will stick with that strategy or it it has less to do with how the company itself is performing up or down. It is about the work and how we handle getting him back there returns. Inorter you buy your stake june of 2013. You have years of experience of dealing with evan spiegel. What is your confidence that both of them controlling more than 90 of the voting shares will not hurt the company as a publicly traded entity . I admire them are being transparent about their longterm views about the company. Invested and then we backed them because we think they are brilliant. They are proven to be so. We have a high degree of confidence in the way they have made decisions and hopefully they will continue to innovate away they had done in the past. Managing that was director of general capitalists. An update from amazon. After an internet outage in the u. S. This week. The company says it was human error that caused the sweeping internet outage that lasted hours on tuesday. Amazon says unemployed accidentally switched off more service than intended. It caused errors that cascaded through the service. The service is used to have data, manage absent Software Downloads for more than one after 50,000 sites. Company, snap has to address slower user growth. We will address the metrics next. This is bloomberg. You are watching bloomberg technology. Jeff sessionsal says he will recuse himself from any federal investigations pacific to russian interference during the president ial campaign. Jeff sessions faced mounting pressure to step aside at the revelations he had talked to a russian on by during the campaign. Egypts Top Appeals Court has acquitted oneill mubarak on charges of killing protesters during the 2011 uprising. Mubarak was sentenced to life in 2012, but another court overturned the verdict two years later. The french president laid out the nationalist policies based on economic patriotism which would be enacted if she wins the election. A 35 tax for French Companies that produce their goods elsewhere then reimport them. The independent candidate also laid out his platform. He says he will not change the retirement age or cut pensions. He does want to cut cost and bureaucracy so it is easier to hire workers. Iraqis civilians continue to flee mosul on foot as the Islamic State launched counter attacks along the southwest. The offensive is causing high numbers of displaced people. Syrian forces battling the Islamic State says they have recaptured a desert town famous for its ancient roman monuments. Global news. 24 hours a day. Powered by more than 2600 journalists and analysts in more than 120 countries. This is bloomberg. It is just after 5 30 in new york. It is 6 30 a. M. By the morning in singapore. Im joined by David English of bloomberg with a look at the markets. Good morning. A little bit of a step back in the u. S. David as one would expect. Not a lot of Risk Appetite as we make our way to friday in the asian pacific. A pullback across global equities. New zealand opened up. Were also about a quarter of 1 . Futures in australia is the next one to open up in 30 minutes. We are looking at a likely pullback of half of 1 there on the sx 200. Japan is one market that might hold steady because of the weekend. Is comingion data through from tokyo a bit later on. We are watching Chinese Markets very closely today. On npc takes off in beijing sunday. That is essentially we get things like the growth target for the year, among other things like the budget and economic priorities of the government. I will be talking a lot about what that means and what those targets may be. A lot to talk about today. Next, bloomberg technology. Caroline this is bloomberg technology. Back to the top story of the day. It is snap in the first day of trading at the new york Stock Exchange. It opened at 41 above the 17 initial Public Offering price. Yet, the Company Still has some things to prove. One concern is the slowing user growth. The company told investors much of the problem was due to an issue with the android product. Snaps usere into andth is cory johnson another analyst. Harnessed some of this analysis. It is something they will be measured against as time goes forward. Will bestthis Country Company to grow it has to be a better business. When i looked through the filings, one of the biggest issues was the rapid decline in user growth. We discussed it a little bit. There certainly acquired a lot of users. You can talk about the engagement and how much time users spend on the service. Is size of the user base half of twitters and a fraction of what facebook is looking at. More importantly, the growth has slowed down dramatically. Only 5 million users added in the Fourth Quarter of last year. Even the quarter be far before, the user growth was quite slow compared to historical numbers. Before that there was an acceleration in growth rate here then enveloped her medically. It coincides with the launch of instagram stories. That is the most disconcerting things. The suggestion is that despite the really cool filters and other unique snapchat things, instagram is eating their lunch when it comes to doing storing ling on the maureen storytelling on a mobile app. You can see it in the numbers. Caroline looking at the bloomberg and diving into the analyst recommendations, we have only three. Two of them is a cell and one of them is a cold. None of them sabine. The share could drop all the way to 10. Give us what the opportunities are to scale . You have highlighted that analysts have seen the revenue slowing. W but it could exceed its current form. If you look at the user growth issue, they are blaming it on the android performance issues and but if you look at it by geography, the rest of the world, not europe and not north america is where it showed that slowdown. They have to show over the next two quarters that they can be resilient in the face of increasing competition from instagram. If they meet those numbers, those are serious problems. Therene do you think will be more than one opportunity for growth outside of the age range. People are now talking about parents being busy snapchat in. But i look outside of the current age group . Guest i dont think so. This is a millennial focused platform. If you look at their strategy of the last couple of years it has been very millennial focus. They get this audience better than most social networks that are out there. Sticking to the strengths a good thing. If you look at the last couple of months, you see the uptick in 35 plus audience. That is interesting. Maybe celebrities and followers that they have onto the platform can be one of the strategies. They celebrities are already celebrities in their own way. What is interesting about the demographic breakdown is that they are hitting saturation points when it comes to the united ace. Others say look at the developed world for them to expand. They have been looking at their international reach. Cory internationally it has been growing. It appears that the service has become suddenly expensive to provide for u. S. Users, or the International Users cop a lot more for them to provide for. International growth might offer into opportunity, it is coming at a greater expense. This is a business that had negative Gross Margins for every quarter of its existence for the last six months. As i mentioned earlier, there are 552 stocks with over 10 market cap. And anothert company have negative Gross Margins. That is not a business. The very instance of any business, making oil wells, making widgets, or making snapchat is that you have to sell something for more than the cost. These guys are not doing that. Caroline when you look at the analysis, you are looking at the Market Capitalization in terms of the ratio of the users desk user base they have. They say the market cap value is significantly less than facebook or twitter. Is one way ofat looking at it. If you look at the big picture and compared to all the key ipos that happened over the last decade, snapchat is coming up at the top of most of them. Evaluations comes outsized expectations. Growth should not be a worry because we just started monetizing it. User growth, if they show any ,eakness given instagrams run that would be bad news for the company. Thatine it is interesting it is like when apple went into using streaming, spotifys Business Model was vindicated. Do you think that facebook is doing everything they can to copy snap because they could not buy it . That is why it is a waitandsee story. Guest initially you have the budget distributed and that is where the Revenue Growth would come on, but longerterm if they prove they can hold the engagement among the group that they have and they continue to toe it easier for markets advertise on the platform they could get it. Caroline the shareholders do not wait. And the seconday test ipo in the last five years. Thank you to both of you. Now, a story we are watching covert watching. Ubers Pilot Program was pull up the street in san francisco. Over once to play by the rules this time after expanded its program from pittsburgh to arizona last week. Coming up, we speak to the first snap investor. About what needham bet on snap and is complicated relationship with the companys founders. That is next. We have been hearing from a variety of voices on apps trading debut. Voice from a portfolio manager. This is bloomberg. Snapchat as broken to be the innovator. They are coming out with the Newest Technology that is being copied. We believe snapchat, as phones oriented, itd will be in the pole position as we going to the next race. Caroline a story we are watching for you. Alibaba is stepping up the competition. They are selling the finance are for 2. 1 billion in cash. They will retain a share of future profits. Alibaba has spun off its own finance unit. Jd. Com is backed by walmart. Can changeng showing how people communicate. Not everyone is on the and write in. Now is now best joining us is a new gas. Great to have you with us. I was just looking at the recommendation. You have a 10 Product Price why so low . O i consider myself cautiously optimistic about the business. A 7e model gets to billion of revenue by 2023, i assume a 30 adjustment on margin which turns into a 2 billion takeoff. To the present using discount rates that are similar to what we might use for facebook which arguably is a little generous. Ive have a little bit of extra risk added, some net opening loss issues. You get to 16 billion. Are not Things Considered is that the share number is closer to 1. 6 billion or this year, not 1. 1, or 1. 4 then im seeing. You end up with 10 a share. Caroline there are far more shares out there that can be converted. What about the future opportunity of growth theyre been looking at. They looking at hardware and international growth. What makes you think it will be 7 billion that will be raking in by 2023 . We assume they can get to the numbers we have assumed. On nonadvertising businesses. We saw a clearly outline Business Plan with a lot of signs indicating meaningful investments toward other business initiatives and it looks significant, then we could imagine it. Imagine whate to that business is, it is not clear to everybody. Snap has spectacles, it does not mean that is a business worth accounting for a this point in time. Caroline what about the ongoing competition we are seeing from facebook . Is that something you are putting into the outlook on the business the fact that so far it is done things well . Guest absolutely. Instagram is eager then snapchat among younger audiences. The ad products are sufficiently similar. You have superior targeting, not to mention established relationships between facebook and every other advertiser on the planet. That is not true for snap at this time. That does not mean that snap cannot generate and revenue and meaningful ad revenue. But it will be easier for instagram to do this. Caroline 10 your price target. When do you see it do you feel in your heart of hearts that the market will follow you within 12 months . Im trying to assess what i think the value of the stock is. What happens from a trading perspective, im not focused on the daytoday. Caroline it has been fantastic having you on the show. Hopefully we will be able to speak to you in the future. Up, we speak to the first snap investor who may a bet on snap. Ad what made his offer complicated relationship with the founders. That is next. This is bloomberg. Caroline a number of Venture Capital forms will make a small fortune from their investment in snap. With one of the very First Investors in the company. We asked them what makes now such an attractive investment. Take a listen. Guest when we met them and heard about their vision, they how social media has become a highlight reel for your life. It was creating a performance anxiety for people. Unless they were looking perfect, they were not putting themselves on social media. They were getting a little sliver of peoples lives. What snapchat did by making a was to bring back the spontaneity and authenticity of communication. It is quite amazing, that you then committed to subsequent rounds. Questioning. T is you still see growth . We first met the company they had less than 100,000 daily active users. Now it is up to 158 million daily active users. It is grown a great deal. We saw at the time amazing engagement. People were using the apps many times a week and many times a day. People open the app 18 times a day. When you say that is become a daily habit for people. When you have a habit like that, you can bring build and interesting and powerful company. The growth has gone below 50 in the quarter last year. Without the accelerated . Will that be accelerated . The use of a started with mostly teenage young women. See that has been spreading to people in their 20s, 30s, and beyond. As you see that broadening, you gain a lot of confidence. What about geographically speaking . They are committed to the developed world only. Are we reaching a saturation point in the u. S. . Is the more room to grow in the United States . If you look at the places with high Speed Internet connections today it is the u. S. , which has about 70 million of the daily active users. Europe is also very big. The rest the world encompasses some of the more parts of asia that have developed telecom and parts of the middle east. Past gen xto expand and my kneels. Do they need to lure the parents of millennials . Of 2012back in the fall snapchat hit the top three in the app store in norway. That was the one place they got big faster than the u. S. There you see it being used by people all across the spectrum. Gender, andage, society. That gives you confidence that this can be something that becomes used broadly by everybody. What about hardware . How much is that a factor . Jeremy the spectacles are fun. I was wearing them this weekend. It was a perfect way to be in the moment and to capture some of those memories without having it be intermediated with a phone and the experience that you are having. It is been a terrific experience. I have to ask you about your relationship with evan spiegel and bobby murphy. How is your relationship with them . What about the lack of shareholder control of snap . Of arduous points of investors . The course of five years there will be points of friction in any relationship. What matters is if you can work through it amicably and find a common solution that everybody feels good about. We did that with snapchat. , even though it is not the end goal, it is an important milestone for the company i think we are celebrating. Do you think the restrictions , as part oflace being on investor when you are a Venture Capitalist . Clear with the company at first that we were interested in what they were doing and would like to continue to invest in the company in the future. That is been what we do have been able to do. You talk about the ipo not being the be all and end all just a key milestone. In another one that is lined up at the moment. Are we going to see more and more companies that are going to list in 2017 . Jeremy a few others on the one went public in september and it is traded well since then. These investments were made a long time ago. Near 10 years ago for out dynamics. Five years ago for snapchat. Work. S the result of hard it is all coming to fruition now. It is a result of work at the time. Caroline our conversation with the Lightspeed Ventures partner. That does it for this edition of bloomberg technology. Tomorrow i will be speaking with the European Competition commissioner. That will be live on daybreak americas. Do not miss it. This is bloomberg. Announcer from our studios in charlie this is rose. Im filling in for charlie rose. President trump delivered an address to the joint session of Congress Last night. He vowed to Reach Across Party Lines to achieve legislative goals. President trump if we are guided to the wellbeing of american citizens, i believe republicans and democrats can Work Together to achieve an outcome that has alluded our country for decades