Facebook (FB) Is a Sucker for Punishment (Update 1)

This article has been updated to adjust the number of users Instagram had upon Facebook's purchase.

NEW YORK (TheStreet) -- Facebook (FB) investors seem to be relishing how seriously the company is taking its teenage demographic leak, after the company reportedly offered $3 billion for Snapchat.

Snapchat, a transient photo messaging app popular among the elusive teen market, allegedly said no thanks to the offer, according to Wall Street Journal sources.

Wall Street seems to love the drama as shares of the social network climbed 1.5% to $49.43 as of mid-morning.

In its recent third quarter, Facebook said of its 728 million DAUs, use among teenagers had declined. The comment rattled appetite for the stock and led many to fret the social network was losing its trend-setting, disposable-cash-rich, social-media-savvy teenage demographic.

To an outsider, a $3 billion all-cash offer for an app with zero revenue (it is free to download and use) seems a no-brainer. But Snapchat's 23-year-old Evan Spiegel, co-founder and CEO is playing hard to buy, reportedly resisting until at least next year by which time he hopes the company has more users and cause for a higher valuation.

To put things in perspective, Instagram, also popular among teenagers, was purchased by Facebook in April 2012 for $1 billion and had 40 million active users that month thanks to a timely Android release. A Forbes estimation puts Snapchat's total users at 26 million in the U.S.

At the time of publishing, Snapchat had not responded to requests for comment. A Facebook spokesperson said the company would not comment on speculation.

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