May 11, 2017

Snap's stock slump won't hurt other tech IPOs

Dan Primack, author of Pro Rata

Greg Ruben / Axios

In the aftermath of Snap's earnings miss and subsequent stock slump, there has been some Silicon Valley concern that the stench could rub off on other tech companies seeking to go public. But it won't.

No harbinger here: Snap's IPO was always an outlier, in terms of both its size (mammoth) and its industry sector (consumer Internet). The vast majority of tech companies going public are much smaller and focused on enterprise customers. If an investor buys or sells into a company like Cloudera or Okta because of Snap's performance, then it isn't a very sophisticated investor.

Lessons learned: One key takeaway for other tech companies, however, is in the area of managing expectations. Per Lise Buyer, a well-known IPO advisor in Silicon Valley: "It isn't that a company should never 'miss' on its first quarter, it is that a company should never 'disappoint.' There is a difference in that one can technically produce the numbers that consensus expected (there are often outliers that don't 'count') but in order to maintain credibility, a company needs to discuss the quarter and outlook in ways that delivers promise, not disappointment."

Go deeper

HBCUs are missing from the discussion on venture capital's diversity

Illustration: Eniola Odetunde/Axios

Venture capital is beginning a belated conversation about its dearth of black investors and support of black founders, but hasn't yet turned its attention to the trivial participation of historically black colleges and universities (HBCUs) as limited partners in funds.

Why it matters: This increases educational and economic inequality, as the vast majority of VC profits go to limited partners.

Unemployment rate falls to 13.3% in May

Data: Bureau of Labor Statistics; Chart: Axios Visuals

The U.S. unemployment rate fell to 13.3% in May, with 2.5 million jobs gained, the government said on Friday.

Why it matters: The far better-than-expected numbers show a surprising improvement in the job market, which has been devastated by the coronavirus pandemic.

The difficulty of calculating the real unemployment rate

Data: U.S. Department of Labor; Note: Initial traditional state claims from the weeks of May 23 and 30, continuing traditional claims from May 23. Initial PUA claims from May 16, 23, and 30, continuing PUA and other programs from May 16; Chart: Andrew Witherspoon/Axios

The shocking May jobs report — with a decline in the unemployment rate to 13.3% and more than 2 million jobs added — destroyed expectations of a much worse economic picture.

Why it matters: Traditional economic reports have failed to keep up with the devastation of the coronavirus pandemic and have made it nearly impossible for researchers to determine the state of the U.S. labor market or the economy.