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Yesterday we got the news we’ve been waiting for.
The Snapchat IPO filing with the Securities and Exchange Commission was made public. To save you hours reading the full 178-page S-1 filing, I’ve summarized some of the key highlights.
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What is Snap?
The company’s official name is Snap. And it’s best known for its Snapchat app.
Snapchat is one of the most popular smartphone apps. It allows people to share photos and short videos that disappear after they are viewed.
Snapchat has a large and engaged user base. Some 158 million people use Snapchat every day, with more than 2.5 billion “Snaps” created.
The app is particularly popular with younger people. About 57 million Americans are using Snapchat. And 85% of the users in the U.S. are between the ages of 13 and 34.
The app is not as widely used as Instagram (owned by Facebook (NASDAQ: FB)). With 300 million monthly active users, Instagram is the most popular photo app.
Snapchat’s user base grew at 48% over the last year. The growth rate is still very high, but slowing due to “increased competition.” That competition is coming directly from Facebook and Instagram.
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How Much Money Does Snap Make?
Snap generates revenues from advertising. In 2016, the company’s revenues were $404.5 million. That was a 589% increase from 2015.
The company is in high-growth mode. Looking forward to 2017, The Wall Street Journal reports that Snap expects revenues to top $1 billion.
One important measure for social media companies is how much revenues they earn per user. In the last quarter of 2016, Snap earned $2.15 per user in the U.S. That compares with Facebook’s revenues of nearly $20 per user.
This shows that Snap has a considerable opportunity to implement more ads in its app. Doing so could help dramatically boost the revenues per user by two or three times. With Facebook earning 10x more revenue per user, there is clearly lots of opportunity for growth here.
The company is unprofitable. In 2016, Snap reported financial losses of $514.6 million. Losses grew by 38% from 2015. In a summary of risk factors, Snap says we “may never achieve or maintain profitability.”
Snap will likely be valued on its revenues and future growth. Few investors who are attracted to this high-growth social media company will be concerned with the company’s financial losses.
Who Owns Snap?
Snap’s biggest shareholders are its founders. CEO Evan Spiegel and CTO Bobby Murphy each own 21% of the company.
The big outside investors include venture capital firms Benchmark Capital Partners with a 12.7% stake, and Lightspeed Venture Partners with an 8.3% positon.
Snapchat IPO: What Are the Details?
Snap plans to list its stock on the New York Stock Exchange (NYSE). The proposed ticker symbol is “SNAP.”
The pre-money valuation of the IPO is expected to be in a range of $20 billion to $25 billion. Snap is seeking approximately $3 billion in equity from the stock offering. The company expects to sell 12% to 15% of its equity in the IPO.
The timeline is not yet completely clear. Under the fastest scenario, SNAP could IPO on the NYSE within three weeks. That would have the stock trading the first week of March.
This will be the biggest U.S. tech IPO since Facebook went public in 2012.
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