Snapchat files for $3bn IPO

7 years ago - Published in Commodities, Finance

Snap, the owner of messaging app Snapchat, filed public documents for a share offering Thursday, seeking to raise up to $3 billion in a keenly anticipated Wall Street debut. 

The California-based tech firm, which allows users to send images that vanish within seconds, was expected to be one of the biggest tech company IPOs in recent years with a valuation likely to top $20 billion. The company revealed in the documents that it made sales of $404m last year, but a loss of $515m.
In outlining its business plan, Snap said it generates revenue primarily through advertising and emphasized its willingness to take risks to drive user engagement at numerous points throughout the filing.

Among other risk factors listed by the company is the age of its core user base, which falls between 18-34 and which the company acknowledges, “may be less brand loyal and more likely to follow trends than other demographics.” In short, this user base, because of its age, is less sticky. In addition, it said that it will have difficulty in countries that lack quality cellular data networks, high rates of smartphone use or both.

The company began in 2011 when co-founder, 26-year-old Evan Spiegel, was still at university.
It now has nearly 160 million daily users and last year revenues grew by nearly 600%, the listing documents revealed. According to the filing, 158 million people use Snapchat daily, and over 2.5 billion Snaps are created every day. 

Snap's offering on the New York Stock Exchange is the largest for a technology company in the US since Chinese-based Alibaba listed in 2014, and before that Facebook's $81bn valuation in 2012.

Facebook, which owns apps such as Messenger and Instagram and is moving into hardware through virtual reality headsets, is seen as Snap’s closest peer and biggest rival. The Menlo Park, Calif., firm pulled in $18 billion in cash at a $104-billion valuation in a 2012 IPO. But Facebook was 8 years old and generating nearly $4 billion in revenue and $1 billion in profit at that time.

The underwriters for Snap’s deal include Morgan Stanley, Goldman Sachs, JP Morgan, Deutsche Bank, Barclays, Credit Suisse, and Allen & Co.

With Thursday's filing, Snapchat stock will begin trading in March. For now, CEO Evan Spiegel and his executive team will go on a roadshow to explain the company to Wall Street.