Snapchat parent announces IPO amid losses

Deutsche Welle
3 Min Read

Fast-growing social media company Snap has filed documents for a share offering, seeking to raise billions of dollars in a keenly anticipated Wall Street debut and after burning massive amounts of cash in recent years.California-based Snap seeks to raise up to $3 billion (2.78 billion euros) in what is expected to become one of the biggest tech company initial public offerings (IPOs) since Chinese e-commerce giant Alibaba went public in 2014. The IPO will be structured with different share classes, allowing co-founders Evan Spiegel and Bobby Murphy to control 88.6 percent of the voting rights.

Documents filed with the US Securities and Exchange Commission on Thursday, did not provide share pricing, and noted that the amount to be raised could be revised before the market debut, which is likely to take place in March.

The parent company of popular messaging app Snapchat also said that it had lost nearly $1billion in the past two years. In 2016, for example, Snap took in $404 million in revenue but lost $515 million.

According to the filing, 158 million people use Snapchat daily, and over 2.5 billion Snaps are created every day. Snapchat has partnerships with dozens of publishers and organizations, including one announced Thursday by the New York Times.

Worth it?

Snapchat, which is known for its disappearing messages, has become hugely popular with young smartphone users. But the company has recently been expanding its offerings to allow publishers to deliver content through the platform.

Snapchat said it expected to derive most of its revenue from advertising, where it will compete against rivals such as Google, Facebook and Twitter. The company noted that since its inception it has been losing money and “may not achieve or maintain profitability.”

While some analysts say Snap has the potential to challenge Facebook, others say it could end up like Twitter, which consistently lost money and whose existence as an independent firm is in danger.

Global Equities Research analyst Trip Chowdhry said in a note to investors the value of Snap was “hyper-inflated,” and that the social media boom was nearing its end because “novelty is giving way to fatigue.”

“Durability is absent in Snapchat… it’s the next Groupon, the next Zynga, the next GoPro, the next FitBit,” he told the news agency AFP, referring to companies which have lost luster after public debuts accompanied by high expectations.

Snapchat was founded in 2011. Just over three years ago, its co-founders turned down an offer from Facebook to buy Snapchat for $3 billion.

In 2016, Snapchat rebranded itself as Snap and has since been eager to show that it can garner revenue from sources other than advertising by launching its video-camera sunglasses called Spectacles.

uhe/jd (Reuters, dpa, AFP)

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