Friday, June 21, 2024

Snap Inc. files a public IPO document but offer no voting right for the investors

It is official now!!!

Snap Inc., the parent company of Snapchat which privately filed for IPO last year has filed a public paperwork Thursday afternoon for initial public offering. The document reveals that the initial offering which is planned for March will be for $3 billion but doesn’t give a valuation.

Earlier it is believed that the valuation could be around $25 billion but may go up further according to experts. Snap is basing its business plan on the increasing number of daily active users. Snap’s daily active users grown to 158 million in December 2016, a 48% year over year growth. Despite the number active users, the widening losses and the firm grip of the founding owners will be a worrying factor for investors.

A worrying lesson from twitter

Facebook may be the model that founder and CEO Evan Spiegel would like everyone to focus on. But when investors think about they have a worrying example of Twitter in front of them. When twitter went public back in 2013 the expectations skyrocketed, everyone expected the company to follow Facebook’s success pattern. On basis of their increasing user growth and the boom in the social media industry, twitter was able to raise $1.8 billion and before the day was closed share priced rose 70% to $44.5 giving company a valuation of $25 billion. Fast forward today the picture is not so pleasant twitter has lost near half of its valuation after the IPO and maybe even looking for potential buyers.

Not a messaging platform

At the top of the document, Snap Inc. identifies itself as a camera company. Evan Spiegel has repeatedly expressed his belief that the camera will be the main interface through with which people communicate through mobile devices. “We believe reinventing the camera represents our greatest opportunity to improve the way people live and communicate,” reads in the top of the filing. Snap’s latest bet to reinvent the camera is Spectacles, funky sunglasses that have cameras built in and can take 360-degree video.

The news brings excitement in the industry but the investor will have a very little say over which way the company will move since Spiegel chose to follow Facebook founder Zuckerberg’s model and to withhold 70%  voting right despite only holding 45% ownership. The company explained in the document that the shares offered in IPO will not have any voting right.