Snapchat reveals $500m loss in IPO filing

Snap Inc, the owner of Snapchat, has just made its initial public offering public the intention of raising $3bn (£2.4bn) and aiming for a valuation of $25bn.

If the parent company of Snapchat succeeds, its co-founder and chief executive Evan Spiegel, will own a stake of up to $5.5bn, with an additional $750m bonus for a successful IPO, reported the Financial Times. Snap’s other co-founder and chief technology officer, Bobby Murphy, has the same stake.

If Snapchat succeeds at ending the day at $25bn, its market capitalisation will be the largest since Facebook’s $104bn market cap, beating Google’s $23bn.

The documents, published on Thursday, also revealed that Snap plans to issue shares with no votes. The co-founders alone will call the shots and will maintain control even if they leave the company.

Crediting its growing advertising business, Snap’s documents reported revenue growth of nearly 700% in the fourth quarter of 2016 to $404.5m.

Nevertheless, the mobile app firm made a net loss of $515m in 2016, greater than its $313m loss the year before. 

This year, estimates eMarketer, Snapchat is expected to generate $935.5m in worldwide ad revenue. Most (86%) of this revenue will come from the US, with that share shrinking to 75% by 2018 as it expands into other markets.

According to the documents, Snapchat has 158 million daily active users, but user acquisition growth slowed in the final quarter of last year to 3%. The firm said this was partly due to technical issues.

To put its user-base in context, Facebook reported 1.2 billion daily active users for its flagship platform yesterday, while Instagram has 600 million.

Venture capital firms Lightspeed Venture Partners and Benchmark Capital Partners have the biggest stakes after the founders with Benchmark standing to make $3.2bn and Lightspeed, $2.1bn if Snap hit the $25bn valuation, said the FT.

Ahead of the IPO, Snap has been doing the rounds with the largest advertising holding groups, reported the Wall Street Journal.

One of its latest deals was announced yesterday. Snap signed on with IPG to sponsor a startup investment programme run by R/GA. Participating companies will receive consulting from R/GA and will collaborate with senior product and strategy leaders within Snap. They will also have access to experts from across IPG’s operating companies.

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