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Snap Inc., which owns the popular social media app Snapchat, has filed Thursday for an initial public offering, reports Variety.
The filing indicated that the company intends to sell stock valued at $3 billion, according to the L.A. Times, though it's not indicated how many shares it plans to sell. The IPO reportedly will value Snap at upwards of $25 billion. If all goes according to plan, it will be the biggest IPO ever offered for a L.A.-based company. As noted at the Times, only Facebook, UPS, Visa, and a handful of other U.S. companies have been valued higher. The company has applied to be listed on the New York Stock Exchange as “SNAP.” Snapchat's executives and early investors are expected to wield all of the voting power in the company.
So it sounds like the app is doing great business, right? Well, it's been turbulent. According to data pulled by CNBC, Snap Inc. had a net revenue of $404.48 million in 2016, a big uptick from the $58.66 million made in 2015. But it also turns out that running Snapchat is a costly business: $924 million spent on hosting costs, research and development, and other ho-hum housekeeping stuff has left the company with a $514.6-million loss this past year. Yeesh.
The company has an estimated 161 million daily active users, with about 60 million of them residing in North America. While the user pool is large, the company does acknowledge that there are potential limitations to its growth. As noted at the Times, Snap Inc. doesn't expect to maintain its rapid growth rate forever; once it plateaus, they'll have have to make the most of user engagement to keep their existing users active. Oh yeah, the company also notes that its main demographic, people who are 18 to 34 years old, isn't as brand-loyal as its older counterparts. And there's also the fact that, as users get older, they tend to use the app less; the company reports that users younger than 25 spend more than 30 minutes a day on average on the app. Users over 25, however, spend only (and we use the term lightly) 20 minutes a day on the app.
As noted at the New York Times, the app started in a setting that's familiar to all startups: the college dormroom. The app is founded by Evan Spiegel and Bobby Murphy at Stanford, and was built as a tool to send messages and visuals that would self-erase after an allotted time. The app would expand to have filters and a "stories" option.
“When we were just getting started, many people didn’t understand what Snapchat was and said it was just for sexting, even when we knew it was being used for so much more,” the company said in a prospectus.
The company has nearly about 1,900 employees. If all goes according to plan, the IPO will turn hundreds of their employees into millionaires. May we suggest donating some of that cash to a good cause?
