Snapchat files for IPO, valued at around US$25 billion

Published at Nov 18, 2016, in Features

In what would be one of the most anticipated deals of the year, the company behind messaging app Snapchat is planning to list on the US share market.

Should the listing take place – indications are it could be as early as March next year – Snap Inc. could be valued up to US$25 billion (AU$33 billion).

Putting that into perspective, it is a far higher valuation than Facebook’s unsuccessful US$3 billion offer in 2013.

If your jaw is on the floor right trying to process that figure, you wouldn’t be the only one – although the many Snapchat filters can fix that:

Snapchat’s parent company, Snap Inc., has filed paperwork with the Securities and Exchange Commission for an initial public offering which would make the listing one of the highest-profile listings in recent years.

Please note that this article is not intended as investment advice. Please seek professional financial advice before making any investment decision in the companies mentioned in this article.

Snapchat aims to generate more than US$1 billion in revenue in 2017. Having made US$50 million in 2015 and expects to generate between US$250-$350 million in 2016.

Currently the app generates relatively small revenues through sponsorship, however as co-founder and CEO Evan Spiegel states, the Snapchat business model is to have three distinct points of monetisation: camera, content and communication.

Spiegel has been hinting at an IPO since 2015, telling Business Insider “We need to IPO. We have a plan to do that.”

It may have taken over a year since Spiegel made that comment, but should the Snap Inc. IPO go ahead as planned at the current valuation, it would be the biggest US listed technology offering since e-commerce giant Alibaba listed in 2014 with a debut valuation of US$168 billion.

How have Facebook and Twitter fared since listing?

Two of the most popular social media forms have had mixed results since going public. Whilst both their user-ship numbers have grown since finding their way on the stock exchange, the same cannot be said for their share price.

Facebook has been the best performer of the two, having originally listed in 2012 at $38 per share with a valuation of around US$90 billion.

The stock sold off and remained low during its first 12 months before making its ascent.

Facebook is currently trading around US$117 per share with a market cap of US$331 billion.

The past performance of this product is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

Twitter on the other hand has been on a rollercoaster run since listing at US$26 a share in 2013.

The social media network famous for its hash tagging shot over US$60 a share within a month. #winning

To be now trading at only US$18.99 per share. #notwinning

The past performance of this product is not and should not be taken as an indication of future performance. Caution should be exercised in assessing past performance. This product, like all other financial products, is subject to market forces and unpredictable events that may adversely affect future performance.

For Snapchat, its performance in this proposed IPO may help determine where the app and social media market is at.

A positive result after listing could see investors embrace the tech market, which has often been overlooked here in Australia.

There are a number ASX listed companies playing in the tech space that could benefit or be affected by the sentiment in the sector once Snapchat lists:

As nearly every industry you can think of integrates more and more technology into its operations it’s only a matter of time before the next Facebook, Twitter or Snapchat are birthed.

S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of Maven Capital Pty Ltd (AFSL No. 418504). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.

Conflict of Interest Notice

S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.

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