Snapchat IPO: Shares off to a flying start

 

The much awaited IPO of Snap Inc (NYSE:SNAP) beat the expectation of analysts as well as investors. The company had priced the IPO at $17 valuing the company at around $24 billion. The stock rose around 44% on the listing day.

The company which was founded by Evan Spiegel and Bobby Murphy was initially named Snapchat Inc and then it was rebranded as Snap Inc to include spectacles product under a single company. The popular two products are Snap Inc and Spectacles.

Snapchat History

Snapchat started as Picaboo which was then a picture messaging app in iOS in 2011. The idea was to create an app to send photos which would then disappear after sending.  Picaboo was renamed as Snapchat. Initially it had about 1k daily active users. Which then jumped to 100k in 2012. It was a significant jump within a short period of time. In the same year Snapchat was launched in Android. The next year the daily active users jumped to 1m. Lightspeed Venture Partners invested about $485,000 in the same year. Their investment now is worth more than $2 billion.

In 2013 Snapchat adds video. It also added stories wherein users can watch story of friends’s day in the order it happened.  Chat was added in 2014 wherein users could send texts and video chats. Daily active users jumped to 50m. In 2015 daily active users increased to 100m. In 2016 Snapchat redesigns chat by adding stickers, voice and video calling. Snapchat also launched Spectacles, sunglasses with an integrated video camera.

Source: Statista.com

Financials

Company reported revenues of $404.5 million for the year 2016 when compared to $58.7 million for 2015. Global Average Revenue Per User (ARPU) for the period of three months ending December 2016 was $1.05 when compared to $0.31 for the same period in 2015. The company had a net loss of $514.6 million in 2016 when compared to a net loss of $372.9 million in 2015.

The company has three classes of shares. Class A, Class B and Class C. Class A common stock which was being sold in the IPO do not have any voting rights. Holders of Class B would have one vote per share. Class C holders will have 10 votes per share. So investors who have invested in the recent IPO would absolutely have no voting power. There was some objection from certain fund houses and investors due to the absence of voting rights.

The investor committee that advises the US Securities and Exchange Commission will be meeting next week to review if the company’s decision to deny voting rights would also reduce the public disclosures on executive pay and corporate governance. They worry that if it becomes a trend then a lot of companies would follow the same model while listing the shares and public shareholders will not have right in the company.

In February company announced that spectacles can be purchased online on spectacles.com. Previously the glasses were sold only through vending machines. The glasses would allow users to take circular videos and post on Snapchat accounts. Though the company doesn’t get significant revenues at the moment they would try to monetize in the future. The company would try to explore the fast growing Virtual Reality segment in the future. Last year the company also bought 3D face scanning app Seene.

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