Snap (Snapchat) files for $3bn IPO


It was widely reported last November that Snap had confidentially filed the necessary paperwork for an IPO with the Securities and Exchange Commission, but had used a JOBS Act provision that allows companies with less than $1 billion in revenue to avoid making that paperwork immediately public.

Snap officially filed for an IPO on Thursday, and told investors it "may never achieve or maintain profitability".

Snap stockholders must also evince near-complete trust in the business acumen of Spiegel and Murphy.

Morgan Stanley and Goldman Sachs Group Inc. are leading the offering with JPMorgan Chase & Co. and Deutsche Bank AG.

One more interesting thing that the company said in its filing is that it is a camera company, rather than saying they are a social media company. This was just about a month after the launch of Snapchat's direct competitor Instagram Stories that recently claimed to reach 150 million daily active users. The company finished 2016 with 48 percent year-over-year user growth, roughly the same growth rate of Facebook's daily audience the year before its IPO (though Facebook's user base was more than three times the size of Snap's). That growth is thanks to the platform's aggressive push into online retailer-friendly advertising units such as Snap Ads with Attachments, which are vertical full-screen video ads.

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Snap is popular among North American teens and young adults. Last year, the net loss widened to $515 million - on revenue of $404 million - from $373 million, and may get even worse. If Snap aims too high, it could end up in a situation similar to Twitter, which has spent its post-IPO existence trying to live up its IPO valuation. That's a steep figure, considering that Snap made roughly $404 million past year.

We believe that one of the major factors driving this growth is the shift of people's attention from their televisions to their mobile phones. In the filing, Snap presented the youthfulness of its user base as key asset in its push to grow sales. According to Nielsen, people between the ages of 18 and 24.

Benchmark Capital owns 12.7% of the Class A share S and 22.8% of the Class B shares. Each share of Class C common stock is entitled to ten votes and is convertible into one share of Class B common stock. According to Snap's filing, Murphy's salary is actually only $10,000 more than Imran Khan, who left Credit Suisse to become Snap's head of strategy in 2014. Snap's founders will keep control as the company plans to only sell non-voting shares.

R&D received $184 million in 2016, while marketing and administrative costs stood at $124 million and $165 million respectively. That offering, in 2014, raised nearly $22 billion.