Snap, the Californian tech firm that owns the messaging app Snapchat, announced that it will make an Initial Public Offering (IPO) on the US stock market with the aim of raising $3 billion. The share sale is expected to be one of the biggest US listings in recent years, and although Snap has never been profitable the business is valued at between $20 billion and $25 billion.
Snap’s financials are also not publicised – the company describes itself as an ’emerging growth company’ under the 2012 Jobs Act, which means it makes a gross revenue of less than $1 billion and is therefore not obliged to disclose its financial information. In its formal announcement to regulators about the IPO, the company revealed that it made sales of $404 million and losses of $515 million last year. More unusually, the share sale will exclude voting rights, which makes the Snap IPO the first of its kind. The sale of shares without voting rights will allow Snap’s founders, Evan Spiegel and Bobby Murphy, to retain control of the company. Despite the unconventionality of the listing and the potential overvaluation of the business, some investors are lured by the promise of its young and engaged user base, which is concentrated in markets with large advertising spend.
Nevertheless, Snap already faces stiff competition from Instagram’s new feature Stories, which is very similar to Snapchat’s 24-hour photo feature. Instagram Stories has launched advertisements that marketers can purchase via Facebook, and the feature has gained 150 million daily active users to date. Several analysts have also deemed the Snap listing an unwise investment, citing Instagram’s strong performance as a key reason.