Snap Inc, the parent company of messaging app Snapchat, filed an initial public offering with the Securities and Exchange Commission on 2 February (Thursday).
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Despite the commitment to cloud spending and future growth, the IPO filing revealed that Snap Inc made a loss of $515 million (£412m) a year ago and only generated a revenue of $404 million (£323m) for 2016. Started by Evan Spiegel, a 26-year-old who dropped out of Stanford University, the app was once dismissed as a sexting app.
Snapchat has become widely popular with teenagers and young adults thanks to messages that disappear shortly after being seen by recipients. Snap also made moves to diversify previous year with the launch of Spectacles, a pair of smart glasses that record video clips.
An average of 158 million people use the Snapchat app on a daily basis, and they create 2.5 billion snaps a day. Investors are concerned that user growth could be slowing as the company had a 7% increase from the second to third quarter.
According to paperwork filed today, Snap has three classes of common stock: A, B, and C. Class A common stock shares-the only ones being sold in its IPO-don’t confer any voting rights on their holders. At the time Snapchat had 5m active daily users. As noted at the Times, Snap Inc. doesn’t expect to main its rapid growth rate forever; once it plateaus, they’ll have have to make the most of user engagement to keep their existing users active.
If the stock performs well, Snapchat’s IPO could encourage other billion-dollar tech startups to go public. We also know the pre-IPO values of the shares.
Snapchat’s success has forced larger tech services like Facebook, Twitter and Instagram to clone its features, with mixed success.
Snapchat could have died a quick death as a “sexting app”, but Spiegel showed a knack for adapting to users’ whims and demands, just as Facebook has over the years.
Snapchat said it expected to derive most of its revenue from advertising, where it will compete against rivals such as Google, Facebook and Twitter. Snap, Inc. has announced plans to raise $3 billion.
Snap hasn’t explicitly announced any plans to come out with hardware other than its Spectacles, but we’d imagine that a camera company would want to make more than one camera.
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The problem is almost four years later Twitter is still struggling to shake off these questions, and there are fears among some experts that Snapchat could shape up to go the same way.
