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Snapchat's Parent Company to Reportedly File for IPO Soon

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Snap Inc, the parent company of popular social network Snapchat, will be filing for its IPO next week, as per several media reports.

The reports further add that Snap Inc.'s financial strategy will become public once the registration document it filed with the Securities and Exchange Commission (SEC) in 2016 is revealed. In November last year , the firm filed for an IPO with the SEC under the U.S. Jumpstart Our Business Startups (JOBS) Act, which permits companies with lower than $1 billion in revenues to "confidentially" file for an IPO, per media reports.

Snapchat has been reportedly valued at $20 to $25 billion. The IPO is expected in March, given the typical "Roadshow schedule." In case of an IPO, Road Show typically means a period where the company will be marketing itself to prospective investors.

Snapchat has been widely considered to be the most hotly anticipated tech IPO since Facebook Inc. FB in May 2012. Since its IPO, Facebook, which carries a Zacks Rank #3 (Hold) has come a long way. In the past five years, Facebook shares have registered growth of 247.63% compared with the Zacks Internet Services industry's gain of 159.08%. Snapchat has also been dubbed as the biggest IPO since Chinese e-commerce giant Alibaba's IPO BABA in 2014.

Snapchat, a relatively new entrant in the social media space, is very popular among teens and millennials primarily because of its "ephemerality". Photos/videos and text sent to friends via Snapchat disappear after sometime.

Snapchat has been offering some serious competition to other social media networks like Facebook and Twitter Inc. TWTR in terms of attracting teenagers/young adults to its platform. Notably, this particular group of the demography, teenagers, is most attractive to social media companies for the ad dollars they bring in. With over 150 million daily active users, Snapchat is emerging as an attractive platform for advertisers.

In fact, Facebook and its subsidiary platforms like Instagram have started to emulate Snapchat features to boost user growth and engagement levels.

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However, there are many analysts who believe that Snapchat might not be able to lure investors. Some analysts claim that this might be due to the fact that interest in social media stock continues to ebb. Others argue that since Snapchat has just one source of revenues i.e., advertising, which only began in Oct 2016, it may be a concern for investors. Also, it just attracts a particular segment of the demography.

However, it seems that Snapchat has taken due note of all these. At the Morgan Stanley MS conference held a couple of months back, CEO Evan Spiegel was quoted by media reports as saying that 50% of its new user base now comprises users over the age of 25. Plus, Snapchat in order to diversify its revenue base, has started selling Snapchat spectacles worth $130.

The IPO will have a host of underwriters including Morgan Stanley and Goldman Sachs.

However, reportedly, Snap Inc investors will have no voting rights as the company does not intend to dilute its power to make decisions.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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