IPO values Snap at $24bn
Snap achieves the third biggest tech IPO of all time with $24bn valuation
After much anticipation, Snap’s IPO finally took place on March 1 at the New York Stock Exchange, giving the start-up a whopping market valuation of $24bn. Shares in Snap, the creator of time-limited messaging app Snapchat, exceeded the predicted range of $14 to $16 per share, reaching $17 instead. With 200 million shares sold, Snap’s IPO has become the third-biggest of all time for a tech company, doubling that achieved by social media rival Twitter.
Even though its shares are non-voting, Snap’s IPO was oversubscribed more than tenfold. In spite of the general enthusiasm, however, corporate governance concerns have been raised as a result of this unprecedented caveat, particularly as it may set a precedent for other unicorn firms to follow suit, leaving investors with little control in how the company operates.
While Snap faces similar challenges to rival Twitter, the Los Angeles-based start-up is expected to becoming a much bigger earner
Trading is due to begin on March 2, under the ticker name SNAP. Despite the worldwide popularity of Snapchat, particularly among teenagers and Millennials, the company has yet to fully monetise this success. In 2016, for example, Snap’s net losses grew by 38 percent, notwithstanding a revenue increase of seven times the amount earned the year before.
While Snap faces similar challenges to rival Twitter, the Los Angeles-based start-up is expected to becoming a much bigger earner in terms of advertising revenue. This anticipation is supported by the ongoing developments introduced by co-founder and CEO Evan Spiegel, such as Snapchat’s Discover feature, whereby content is shared by the likes of media giants CNN and ESPN, as well as 2016’s Spectacles physical product offering.
Goldmach Sachs, the IPO’s leading bank, has estimated that Snap’s number of daily users could exceed 220 million, with its revenue swelling to $2bn by 2018 – five times that of 2016.
Though Snap still has work to do it terms of monetisation, the company is in an excellent position to grow its revenue, particularly given the fast-paced level of innovation encouraged by Spiegel. With a $24bn market valuation now backing the company, its commercial success may well rival that of Facebook in the coming years.