Snapchat files for $3 billion initial public offering

Posted at 4:43 PM, Feb 02, 2017
and last updated 2017-02-02 17:43:43-05

NEW YORK (CNNMoney) -- The biggest social media IPO since Twitter is here.

Snap Inc., the parent company of Snapchat, filed paperwork on Thursday to raise $3 billion in its long-awaited initial public offering.

The tech company will only sell non-voting shares when it goes public. It will list on the New York Stock Exchange under the ticker symbol "SNAP."

The documents offer the clearest glimpse yet behind the curtain of one of the tech industry's most secretive startups.

Snap claims 158 million daily users and said over 2.5 billion Snaps are created every day.

However, the young company continues to struggle to make money -- and it signaled a profit may not be coming soon.

Snap suffered losses of $515 million in 2016, up from a loss of $373 million the year before.

"We have incurred operating losses in the past, expect to incur operating losses in the future, and may never achieve or maintain profitability," Snap said in the filing.




The company confidentially filed paperwork for an IPO before the presidential election. It took advantage of the Jumpstart Our Business Startups, or JOBS Act, which allows companies with less than $1 billion of annual revenue to file for IPOs in secret.

Snap makes money from an eclectic mix of sources, ranging from traditional video ads and sponsored location-based filters to physical products like smart sunglasses sold out of smiling vending machines and ice trays sold on Amazon.

The Snapchat app launched in 2011 and set itself apart from other messaging services with a focus on disappearing messages. It initially developed a reputation as a service for sending salacious pictures, but has since moved far beyond that.

Today, Snap defines itself as a "camera company." It sells Spectacles for recording videos and has built up its flagship app with augmented reality lenses that make sharing posts with friends more playful and engaging.

On any given day, you can flip through collections of posts from users attending the same event or find big name publishers like Vogue, National Geographic and CNN curating content specifically for Snapchat.




Snapchat's success has forced larger tech services like Facebook, Twitter and Instagram to clone its features, with mixed success. Facebook famously tried to acquire the company for $3 billion in 2013. The sum sounded outlandish at the time -- now, not so much.

The public offering will officially make Snap's cofounder and CEO Evan Spiegel, 26, one of the world's youngest billionaires.

If the stock performs well, Snapchat's IPO could encourage other billion-dollar tech startups to go public. Many startups have preferred to sit on their vast piles of private funding rather than deal with public market scrutiny.

But Snapchat may also have to contend with comparisons to Twitter, which went public amid high expectations in 2013 only to crash and burn after its first earnings report.

Investors thought Twitter might be the next Facebook, with more than one billion users and tremendous demand from advertisers. Instead, Twitter's user base stalled around the 300 million mark.

The challenge for Snapchat, according to Monness, Crespi, Hardt analyst James Cakmak, will be getting investors to focus more on how much users actually "engage" with its services rather than just overall user growth.

"Since they've managed to successfully change the way advertisers think, investors should be an easier sell," Cakmak says, before adding a caveat: "So long as the growth curve remains steep."

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