Infamous instant picture messaging app, Snapchat’s parent company, Snap Inc are going to be getting an IPO valuing the LA-based company at $20 billion.
Snapchat plans IPO
The Initial Public Offering is one of the biggest US tech IPOs and the planned date will be in March of 2017. An AP report says that Snap Inc is valued at $20 -$25 billion and has a small handful of products including Snapchat and Spectacles (sunglasses for Snapchat).
Max Wolff, a market strategist at 55 Capital told Reuters:
It is a very clearly inexperienced team leading a company that’s asking for two things: a huge valuation and a very aggressive multiple, once you start asking public investors for 30x earnings, the tolerance for mistake, misadventure and learning on the job goes down.
Snap’s biggest app, Snapchat has almost 100 million users and is mainly used by teenagers to send quick photos and text messages to each other. Since its release in 2012, the app has grown to become noticed by Facebook’s Mark Zucherberg who tried to buy the app for $3 billion back in 2013.
As a result of the declined offer, Facebook pushed out Stories for Instagram this year to add pictures and videos temporarily to your Instagram account. This massive $3 bln offer might be a reason why the standing IPO is $20 billion.
Snapchat’s popularity itself has grown so popular that it is now used by many marketers and companies as a way to show off their company through their Stories, one example would be Nasdaq’s Snapchat.
Snapchat on Wall Street
The Wall Street Journal reported that Morgan Stanley and Goldman Sachs Group Inc will be covering the Snap IPO.
Many potential investors are now considering the fact that the Snap IPO will be one of the largest tech IPOs since Alibaba Group Holdings Ltd had a whopping $168 billion IPO in 2014. Another factor they are considering is the maturity of the company’s co-founders, both in their 20s.
According to WSJ, Snap’s main source of revenue is ad revenue and geofilters from Snapchat. Snap has estimated their revenue for 2016 is $250 to $350 mln and could increase to $1 bln in 2017.