Update: Snapchat filed for IPO on Thursday 2nd February 2017 and went public on the NYSE on March 2nd 2017. It is now trading under the ticker ‘SNAP’ and an initial guide price of $17 per share rose to an opening price of $24 on its first day of trading, increasing the company valuation to $28bn, far superior to the proposed $23.8bn. The float made co-founders Evan Spiegal and Bobby Murphy multi-billionaires. Despite some warning signals and no voting rights for investors, the shares were ten times oversubscribed.
After a relatively barren 2016, the new year promises to herald a ‘return of the tech’ with Snapchat joining Spotify, Uber and Dropbox as tech giants that may go public in 2017.
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Founded in 2011 by Evan Spiegel, Bobby Murphy and Reggie Brown, Snapchat has quickly exploded from pretender to contender in the competitive world of photo sharing and instant messaging, boasting ten million daily active visitors in the UK alone by May 2016. The increased number of users has almost inevitably led to greater advertising revenue for the company – up to $300m in 2016 – and it is with this in mind that an IPO has been rumoured.
What started the rumour?
In November 2016 Snapchat’s parent company, Snap, filed its paperwork and, according to some stories, could be ready to go by March of this year. In early 2016 the company raised an additional $1.8bn from private funding at a valuation of $18bn.
The company has always been renowned for thinking big and it was famously reported that they turned down a $3bn offer from Facebook back in 2013. This, added to the fact that it is one of the fastest-ever growing social media platforms, has ensured that it is no surprise that an IPO could be on the cards.
Many sources place the potential IPO valuation between $20bn and $25bn, a figure which would see the company trading at more than 25 times its projected ad revenue for 2017, which will be just under $1bn according to latest estimations.
On 5th January 2017, it emerged that a former employee – Anthony Pompliano – filed a lawsuit against the company, claiming that Snapchat is guilty of over-inflating user numbers to deceive potential investors.
There is also the small matter that two of the giants in the world of social media, Facebook and Twitter, have followed dramatically different paths since their respective IPOs, and there are some naysayers who predict Snapchat could go the way of the latter. However, in preparation for the potential IPO, there has been a noticeable push to diversify offerings on the app in order to turn it into a ‘pre-eminent content and media company’ and to align Spiegel with innovators such as Mark Zuckerberg and Steve Jobs.