What Does Snapchat’s IPO Mean For Their Future?

What Does Snapchat’s IPO Mean For Their Future?

Like
10
0
Wednesday, 05 July 2017
Apps

Snapchat has rapidly risen in popularity since its launch a few years ago. A one to one messaging service, Snapchat spread across the United States. Today, Snapchat is used by over 100 million users throughout the World. Recently, Snapchat’s parent company Snap Inc announced that it has gone public. The company is valued at over $20 billion, and has raised another $3 billion on the NYSE. Here is a closer look at Snapchat’s IPO.

What Does Snapchat's IPO Mean For Their Future?

Financials

Snapchat has seen substantial revenue growth. Snapchat received over $400 million in revenue, which is more than double the amount of revenue received during the previous year. Snapchat’s cost of revenue remains higher than its total revenue.

Consumers

With well over 100 million users, Snapchat has become one of the most popular apps in the World. Most users check their snaps over 12 times a day. However, Snapchat’s rate of growth has been slow to improve. Snapchat believes the stagnant rate of growth can be contributed to different performance issues, such as Android product updates, as well as increased competition in the marketplace, most notably from Instagram.

There are rumors that Snapchat’s IPO is an attempt to lure a last minute acquisition bid. However, Snapchat Chief Executive Officer Evan Spiegel is not looking to sell at this time. Analysts also speculate that Snapchat’s high price tag will prevent any last minute activity.

Ownership

Snapchat shareholders do not have a vote. Spiegel and co-founder Robert Murphy maintain complete control of the company. Snapchat has gone public with its non voting stock on a U.S. exchange. Some investment managers are at U.S. pension funds are not happy about Snapchat’s no vote shares. The Council of Institutional Investors has asked Snapchat to rethink its approach. Benchmark is the largest outside shareholder, followed by Lightspeed. Snapchat is also known for having a very structured vesting schedule for employee stock. That said, most stock owners stand to make a huge return on their initial investment; one which most of us can only dream of.

Overview

Many Snapchat users have complained about the difficulty in using the app. Spiegel notes that one of the most beneficial aspects of the app is that Snapchat constantly adds new features and products. Instagram’s stories feature now poses a serious threat to Snapchat, as more users are starting to leave Snapchat and just stick to Instagram. This has lead to serious questions about how large Snapchat’s user base will actually become. By Snapchat being a data intensive app, this is seen as a detriment to some people, as costs continue to rise in regard to data usage.

Many investors feel that if Snapchat wants to stay independent, the company may be forced to make their own set of acquisitions. Overall, while Snapchat understands that they have work to do to reach the heights of Facebook, their current path is enticing enough to interest a lot of potential investors.

Leave a Reply