Business

Aw, Snap. I bought the wrong shares!

  • 9 February 2017
  • From the section Business
Snapchat logo Image copyright Getty Images
Image caption Shares in Snapchat's owner are not on sale yet.

Shares in a little known US start-up have almost doubled in value, seemingly because traders thought they were buying into the firm behind Snapchat.

Snap said last week it planned to raise $3bn in a stock market listing, though no date was set.

Since then, over-eager investors appear to have been getting ahead of themselves, buying into an unrelated company called Snap Interactive.

The mobile dating app maker's shares have surged 95% in the past week.

How are they different?

Snap Interactive is a software company based in New York, valued at around $54m (£43m).

Specialising in real time video communication, its brands include Camfrog, and it claims to have helped "hundreds of millions of users around the world make meaningful friendships and romantic connections".

Snap Inc is based in San Francisco, and after its planned flotation could be worth as much as $25bn.

Image copyright Snap Interactive/BBC
Image caption Snap Interactive says it has helped create "meaningful friendships and romantic connections".

That would be one of the biggest technology listings in years and make founder Evan Spiegel, who set up the firm in 2011 when he was 26 years old, even richer.

Snap's Snapchat app lets users exchange videos and pictures and is particularly popular with people aged 13 to 24. But it also wants to branch out and now describes itself as "a camera company". It has launched glasses with a camera in them.

Both firms are loss-making.

Not the first time

Investors have mistaken little-known companies for more famous ones before, and a similarity in name is usually the cause.

Stocks in Tweeter Home Entertainment Group soared more than 500% as excitement ran high about a share sale at the instant messaging app Twitter in 2013.

A year later, Facebook's $2bn deal to buy virtual reality headset maker, Oculus VR, sent shares in Oculus VisionTech surging more than 150%.

"To err is human, but to buy shares without checking what you are buying can be a costly mistake", said David Kuo, chief executive of the Motley Fool Singapore.

"Investing should never be about shooting first and asking questions later. Ask all the necessary questions and ask them again before you pull the trigger."

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