Everything you need to know about Snapchat and Snap’s IPO
Snap Inc., a Los Angeles company that makes one of the world’s most used and recognized smartphone apps, will soon begin trading its stock on public markets. Here are the key details gleaned from the company’s S1 filing with the U.S. Securities and Exchange Commission.
What is Snap Inc.?
Snap Inc.’s flagship product is Snapchat — an app that lets people send each other photos and short videos that disappear after being viewed. On average, 158 million people use Snapchat daily, and more than 2.5 billion Snaps are created every day.
Snapchat is also a place where people consume media, thanks to partnerships with publishers including CNN, BuzzFeed, Cosmopolitan and Vogue.
Then there’s Spectacles, a pair of sunglasses with a built-in camera that can be used to take snaps. They’re a bit of a novelty, but they help explain why Snap describes itself as a camera company.
A camera company?
Here’s how Snap explains its camera-centric vision in its filing:
“We believe that the camera screen will be the starting point for most products on smartphones,” the company said. “This is because images created by smartphone cameras contain more context and richer information than other forms of input like text entered on a keyboard. This means that we are willing to take risks in an attempt to create innovative and different camera products that are better able to reflect and improve our life experiences.”
How does Snap make money?
Like other social media platforms, Snap makes the bulk of its revenue from advertising. During 2016, the company recorded $404.5 million in revenue, up from $58.7 million in 2015. Although that’s almost a seven-fold increase, the company incurs substantial losses.
In 2015, the company lost $372.9 million. In 2016, Snap lost $514.6 million.
What stands in the company’s way?
Snapchat can’t succeed without its young following.
Each day, users under 25 visited the app more than 20 times and spent more than 30 minutes on Snapchat on average, according to a company study conducted from October to December of last year. By comparison, users 25 and older used Snapchat about 12 times and spent about 20 minutes on the app per day over the same period.
Retaining young users is not assured given the group’s penchant for jumping onto the next cool thing.
Snapchat could face new rivals or stiffer competition from apps like Instagram, which has adopted similar features.
Snapchat also requires heavy data usage, which would challenge its ability to expand to emerging economies where telecommunications infrastructure remains underdeveloped.
Who are the leaders of the company?
The company’s chief executive is 26-year-old Evan Spiegel, and its chief technology officer is 28-year-old Bobby Murphy. In its S1, Spiegel is said to be responsible for the company’s “strategic vision,” while Murphy developed the app’s technical foundation.
Then there’s Reggie Brown, who sued Snap Inc. in 2013, alleging that Spiegel and Murphy had taken his idea for Snapchat and ousted him from the company. Though the company’s S1 filing does not mention Brown by name, it says that an individual was paid $157.5 million to settle a lawsuit that alleged that Snap was “using certain intellectual property that the individual jointly owned with our founders.”
Who’s on the board of directors?
- Michael Lynton (CEO of Sony Entertainment)
- Stan Meresman (Board director of Palo Alto Networks Inc.)
- Joanna Coles (Chief content officer of Hearst Magazines)
- Mitch Lasky (General partner at Benchmark Capital)
- A.G. Lafley (Former chairman of Proctor & Gamble)
- Scott D. Miller (CEO of G100 Companies)
- Christopher Young (GM of Intel Security Group)
- Evan Spiegel (Snap CEO)
- Bobby Murphy (Snap CTO)
Who are its major shareholders prior to the IPO?
Spiegel and Murphy are tied for the two biggest shareholders. They’re followed by Benchmark Capital (represented by board member Mitch Lasky) and Lightspeed Venture Partners as the only four shareholders with voting power.
What would an IPO do?
Money raised through an initial public offering would help capitalize the company, potentially funding its growing workforce of nearly 2,000 employees, expansions into new, high-capital markets, and rollouts of additional hardware such as Spectacles, which cost a lot more to produce than software.
When is Snap’s IPO?
Under the quickest timeline, company executives would begin courting investment pledges from big money management firms in about three weeks before listing its shares in early March. Look for shares to trade on the New York Stock Exchange under the ticker symbol SNAP.
The company, of course, could also pull the plug and choose to remain private if investors seem skittish or the stock market takes a turn for the worse.