Snap's IPO was much more expensive than those of other tech companies

Andy Kiersz,Skye Gould

Mar 2, 2017, 23:06 IST

REUTERS/Brendan McDermid

A Snapchat sign hangs on the facade of the New York Stock Exchange (NYSE) in New York City, U.S., January 24, 2017

Snap, the owner of the popular photo and social media app Snapchat, had its big IPO Thursday night, with shares going for $17 apiece. That gave the company a $23.8 billion valuation, even though Snap has never turned a profit and even stated in its IPO filing that it might never be profitable.

By at least one measure, Snap had a more expensive IPO than several other big recent tech IPOs, according to Fortune's Lucinda Shen.

Because Snap has never been profitable, Shen looked at the price-to-revenue ratio for Snap and several of its peers, rather than the more conventional price-to-earnings ratio normally used when valuing a stock.

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Snap's IPO valuation of $23.8 billion and 2016 revenue of $404.5 million gives a ratio of 58.8. Shen noted that Snap's price-to-revenue ratio was much higher than those of a lot of other big tech companies at the time of their IPOs.

The closest ratio, according to Shen, was Twitter's, with the social media company's IPO valuation being 44.8 times its revenue.