Snapchat still a mystery to investors

Snapchat is popular among teens and twenty-somethings, but their parents, or even grandparents, are more likely to consider buying into Snap Inc.’s $3.2 billion public offering. And that’s an issue as Snap’s initial public offering approaches.

Unlike Snapchat’s young user base — Snap says the majority of users are between 18 and 34, and users younger than 25 are the most active — many professional investors neither use nor understand the disappearing-message app. Combined with Snap’s large losses and decision not to issue voting rights to investors, the dissonance is holding back some from investing in the offering and may cause issues for the stock down the line.

Snap SNAP, +0.00% is expected to price its offering Wednesday evening. At the top of its $14-to-$16 price range, Snap would receive an initial valuation of $18.5 billion, and this issue will certainly not keep it from selling the initial batch of shares: The offering is reportedly oversubscribed at the high end of Snap’s range, according to Reuters.

The question is long-term demand after shares begin trading Thursday on the New York Stock Exchange. Experts say that reluctance and confusion on the part of traditional investors could weigh on the stock, and those who do buy could be more likely to drop their shares if the company has a tough quarter.

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