The company behind Snapchat, a teen-oriented social network famous for its quickly disappearing messages, has filed for what could be one of the largest tech initial public offerings (IPO) in years.
Snap Inc on Thursday said that it is seeking up to US$3 billion in an IPO, a figure that could shift based on investor demand. That demand will help determine the price per share sought by Snap in the upcoming weeks.
Snapchat has millions of users,and Snap has built a thriving ad business on it. However, the company has also made a lot of money — nearly US$900 million — disappear in the past two years.
The fast-growing social network for the younger set boasts 158 million daily users. It lets people send photographs, videos and messages that disappear a few seconds after viewing.
It was created in 2012 by Evan Spiegel, who dropped out of Stanford University just three classes shy of graduation to focus on the app.
Spiegel, 26, is poised to become a multibillionaire, along with his former fraternity brother at Stanford, Robert Murphy, 28, who is also a company cofounder.
Each man owns 227 million shares of Snap stock, which was valued at US$30.72 per share nine months ago when the company raised US$700 million from a group of investors, according to its IPO documents filed on Thursday.
If Snap can fetch the same price in its IPO, Spiegel and Murphy each will be worth US$7 billion.
Snapchat could have died a quick death as a “sexting app,” but Spiegel showed a knack for adapting to users’ whims and demands, just as Facebook has over the years.
This, as both companies have discovered, is key to outlasting social media fads. Snapchat is no longer just about disappearing messages.
Over the years, it has added a “Discover” section where a diverse group of publishers — including People magazine, the Wall Street Journal, CNN, Vice and Food Network — post video-heavy stories aimed at millennials.
Another feature, “Stories,” lets people create a narrative from messages, videos and photos from the past 24 hours. Then there’s goofy “Lenses,” which lets people add animated overlays to photos and videos — animals, for example, or flower crowns and sparkly eyes.
If its IPO matches the US$30.72 per share price obtained in its last round of financing, Snap would have a market value of about US$30 billion, based on the quantity of stock listed in its IPO documents.
Investors who snap up the IPO will be taking a gamble on a Los Angeles-based company that has lost US$1.2 billion so far while growing rapidly.
Snap had revenue of US$404.5 million last year, up from US$58.7 million in 2015. Its net loss was US$514.6 million last year, up from US$372.9 million the year before.
Snap stockholders must also evince near-complete trust in the business acumen of Spiegel and Murphy.
The cofounders would have controlling power over all matters at Snap through a special class of stock that gives them 10 votes for every share they own.
The stock being sold in the IPO has no voting power, while another class has one vote per share.
The discriminating classes of stock designed to give final say to the company founders is similar to setups at Facebook Inc, where CEO Mark Zuckerberg holds all the power, and Google parent Alphabet Inc, where Larry Page and fellow cofounder Sergey Brin can override all other shareholders.
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