Snap Inc on Wednesday priced its initial public offering (IPO) above its target range, raising US$3.4 billion as investors set aside concerns about its lack of profits and voting rights for a piece of the hottest tech offering in years.
At US$17 a share, the parent of popular disappearing-messaging app Snapchat has a market valuation of about US$24 billion, more than double the size of rival Twitter Inc and the richest valuation in a US tech IPO since Facebook in 2012.
The company had targeted a valuation of between US$19.5 billion and US$22.3 billion.
Photo: Reuters
The book was more than 10 times oversubscribed and Snap could have priced the IPO at as much as US$19 a share, but the company wanted to focus on securing mutual funds as long-term investors rather than hedge funds looking to quickly sell, the source said.
The share sale was the first test of investor appetite for a social-media app that is beloved by teenagers and 20-somethings who use it to apply bunny faces and vomiting rainbows onto selfies, but faces a challenge in converting “cool” into cash.
Despite a nearly seven-fold increase in revenue, the Los Angeles-based company’s net loss jumped 38 percent last year. It faces intense competition from larger rivals, such as Facebook Inc, as well as decelerating user growth.
Snap priced 200 million shares at US$17, above its stated range of US$14 to US$16 a share.
Investors bought the shares despite them having no voting power, an unprecedented feature for an IPO despite years of rising concerns about corporate governance from fund managers looking to gain influence over executives.
Snap was set to begin trading yesterday on the New York Stock Exchange under the symbol SNAP.
Although Snap is going public at a much earlier stage in its development than Twitter or Facebook, the five-year-old company is valuing itself at nearly 60 times revenue, more than double the 27 times revenue Facebook fetched when it went public in 2012.
The company has been vague on its plans to lead and monetize image-driven conversations, but has suggested investors put faith in the vision of its cofounder Evan Spiegel, whom it introduced in its investor roadshow as a “once-in-a-generation founder.”
The 26-year-old will walk away with about a 17 percent stake valued at US$4.05 billion
Spiegel and cofounder Bobby Murphy each sold 16 million shares in the IPO that earned them US$272 million apiece. Dozens of other Snap investors could become overnight millionaires.
Spiegel and Murphy will maintain tight control over Snap’s stock through a unique three-share class structure.
The structure will give the pair the right of 10 votes for every share.
Existing investors will have one vote for each of their shares, while new investors will have no voting rights.
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