Will Snapchat post big gains?
On 2 February, tech giant Snap Inc announced its aim to raise $3 billion in an IPO rumoured to take place in March. Such a figure may have particular resonance for co-founders Evan Spiegel and Bobby Murphy, who once turned down a buyout offer of this size from Facebook CEO Mark Zuckerberg.
Snapchat’s IPO stands to be one of the biggest US-listed tech IPOs ever, even after the photo-sharing company lowered its original valuation expectations – of $25 billion – to $22 billion. Analysts have been using Twitter and Facebook as touchstones by which to assess Snapchat, but both companies’ fortunes have diverged in dramatic ways since they floated, making it hard to say if Spiegel and Murphy’s confidence will prove justified.
Despite the five-year-old company’s spiking revenue – which increased by 600% in 2016 – there are still questions over a business model that anticipates substantial future operating losses while foregoing profitability. Muddying the waters further still is the fact that Snapchat’s proposition is different to that of its Silicon Valley neighbours. The tech sweetheart will not be selling any voting shares, so even with public funds, its executive board will still keep total control of the entire company.