Snapchat is looking to raise $3 billion in the offering and it will list on the New York Stock Exchange under the ticker symbol SNAP. The company filed public regulatory documents for a hotly anticipated $25 billion IPO Thursday. It made many of its financial details public for the first time on Thursday.
Snap registered with the U.S. Securities and Exchange Commission late last year and kept the prospectus confidential. Even some of its IPO underwriters were not aware of it prior to its publication on Thursday, sources familiar with the matter told Reuters.
The company, which described itself as a camera company in the IPO prospectus, started selling $130 video camera glasses last year. Snap also generates a majority of its revenues from advertising. It had $404.5 million in sales in 2016, up from $58.7 million in 2015. However, it had a net loss of $514.6 million in 2016, up from a net loss of $372.9 million in 2015.
With SNAP entering the IPO market, co-founders Evan Spiegel and Bobby Murphy still have stockholder control. With the pair owning 21.8% of the Snapchat shares, they took home $2.4 million $503,000, respectively, in 2016.
To help you along with monumental market entry, here is a guide on S-1 papers to help you understand it better. Information includes business status, stockholder options and the like.
Guide On S-1 Papers & How You Can Invest
A Young, Active User Base
Snap has gained popularity among youngsters between the age 18-24. This age group uses Snapchat 20 times per month and spends about 30 minutes per visit. For users 25 and up, they visit the platform 12 times monthly and spends approximately 20 minutes. The app gained popularity with the younger age bracket because it allows people to share photos and videos that are only available temporarily.
Snapchat IPO: Making It Big
Snapchat IPO is expected to be the biggest initial public offering ever for a Los Angeles company and one of the highest valued in U.S. history. The Snapchat IPO is coming at a time when tech IPOs are quite limited. And its performance could be the first of the big “unicorn” start-ups to test the public markets this year.
Snapchat will most likely generate $935.5 million in worldwide ad revenue this year, up 155% from 2016. Most of it comes from the United States. Snapchat took nine quarters to grow to 150 million users, compared to four quarters for Facebook and six quarters for Instagram.
Doug Clinton, an analyst with Loop Ventures, said: “Although neither picture-based platform is growing as fast as Facebook did in its heyday, we saw that teens already value Snapchat and Instagram over the older, text-based platforms of Twitter and Facebook.”
Snapchat vs. Instagram
Snapchat explains why growth is slowing. They could have just said, "Instagram Stories." pic.twitter.com/ihHBDbI7v3
— Ben Sandofsky (@sandofsky) February 2, 2017
Snapchat’s was initially ahead of Instagram in terms of time spent in the app per Android user but it has declined in the U.S. In early 2016, Snapchat had more time spent per user worldwide, but Instagram took a 25 percent lead by December. In the U.S., Snapchat had a 35 percent lead as of December 2015, but that shrank to a 20 percent lead by December 2016 after Instagram Stories.
Twitter & Facebook IPO Stats
In 2013, Twitter filed for an IPO that didn’t turn out to be a success for investors, mostly because the network itself hasn’t grown substantially since. At the IPO launch in 2013, the company was valued at $18 billion 2013; today it’s down to $12.2 billion.
On the other hand, Facebook filed an IPO in 2012 that valued over $80 billion. Back then it had 845 million daily active users. Today, it has a market value of $385 billion.
Snapchat IPO Estimates
Snap has mixed views on whether it will turn out to be like Twitter, that went down, or like Facebook, whose double-digit growth rate continues to wow investors. Edison Investment Research analyst Richard Windsor says Snap “looks more like Twitter than Facebook.”
In a note to investors, Windsor said the company appears to be focusing on engagement metrics to justify the high valuation. “We see this as a sure sign that real metrics such as revenue and profit will fall far short of that which a regular company would need to justify that valuation.”
Windsor also believes that Snapchat’s users too young for advertising growth, considering that 12-24 age group does not have a lot of money to spend on products. In order to have any chance of justifying the IPO valuation, Snap Inc. will have to develop its strategy beyond its core offering.
Contrary to that, Zack’s Investment Research, Madeleine Johnson expects big things from Snap. She thinks that Snap is a company for the digital age and technology-grounded economy. According to her, what makes the company IPO catch is its smart advertising strategy and ephemeral business model.
The company has three classes of common stock. It also plans to offer common A stock so stockholders do not have any voting power. Owners of class B common stock will have one vote per share. Holders of class C common stock, including co-founders Evan Spiegel and Robert Murphy, are entitled to 10 votes per share.
That kind of ownership offers both parties the ability to control the outcome of all matters that are sent to the stockholders for approval. The filing has not disclosed what percentage voting power they will have after the offering.
Snapchat IPO: How To Invest?
Directly from the company: Snapchat will soon allow individual investors to buy shares at the IPO price. One way to do this is a dutch auction- used by Google when it went public. In a dutch auction, any investor is allowed to enter a bid for the shares before they begin trading. The bids are then analyzed, a price is set, and investors who place adequate bids can buy the shares.