
Snapchat Parent Working on IPO That Could Value Company at $25B or More - coloneltcb
http://www.wsj.com/articles/snapchat-parent-working-on-ipo-that-could-value-company-at-25-billion-or-more-sources-1475778314?mod=BNM
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droidbro
[https://www.reddit.com/r/Android/comments/567m32/can_we_talk...](https://www.reddit.com/r/Android/comments/567m32/can_we_talk_about_snapchat_quality_on_android/d8i248m)

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guelo
I have huge respect for Evan Spiegel. So many others, like the Instagram and
Whatsapp guys took Facebook's money and folded but Spiegel went for it
creating one of the rare new successful independent social networks. Bravo.

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sroecker
$25B and they can't even afford an API..

If you want analytics you have to rely on a 3rd party provider who somehow
gets the information by logging into your account. I guess if you're a key
account they will send you some data and maybe even some nice visualizations.

I did some research and people really track their audience with spread sheets.
Influencers send screenshots of their accounts to advertisment companies to
prove how many followers they have. Seriously.. If they want to monetarize
their platform they should open at least part of their API.

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ihunter
Everytime I use snapchat I feel bad for the major content generators on the
site. It's literally a 18 hour a day job of taking video in every situation
they're in. I can't imagine that level of imprisonment.

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mahyarm
This is far quicker time to IPO than most startups.

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jonknee
It's five years old and they're talking about a possible IPO six months from
now, not exactly a huge rush.

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f4rker
DotCom Bubble 2.0 is real $25B for an app like SC w/o a web presence is far
far too high.

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ghull95
Facebook IPOd at ~$100B with annual revenue of roughly 4B. Snapchat is
estimating 2017 revenue at 500mm-1B so it is not much different than what FB
IPOd for. While the comparison of FB and Snapchat may not be the most valid, I
still think it is worth noting that the Snapchat valuation isn't exactly
unheard of.

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jonthepirate
Iceberg ahead, captain! I wish there was some way to short this.

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changdizzle
Couldn't you just short the stock when it IPOs? :)

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jamesrom
What you are seeing here is called anchoring.

Now when the actual IPO happens and it's $10bn, you'll think it's a good buy.

[https://en.wikipedia.org/wiki/Anchoring](https://en.wikipedia.org/wiki/Anchoring)

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acchow
Does this actually work on the real stock market? (i.e. with so-called "smart
money" and not penny stocks)

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adventured
I've never seen an IPO underwhelm that much and have it not be a negative
overhang. The financials will either support $10b, something more, or
something less, in terms of exciting investors. If the financials - growth etc
- are underwhelming, institutional investors are not going to magically get
excited about the stock just because it comes out at $10 billion. Twitter
(among others) has has been a disaster, institutions are going to be skeptical
unless the numbers are extremely encouraging.

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dcgudeman
_A level of $25 billion or more would also represent a significant premium to
Snap’s most recent valuation, which was pegged at $17.8 billion in its last
funding round in May. That would bode well for a new-issue market that until
recently suffered from reluctance on the part of public investors to match the
private valuations of many Silicon Valley startups._

I honestly wonder how they come up with these numbers.

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ironchef
Normally it's based on (roughly) multiples of revenue, future earnings, etc.
Their revenue this year was estimated to be like 370 million.

Let's compare that to recent IPO darling Nutanix. Nutanix had revenue of
approximately $241 million and was valued at north of 2 billion. So that's
approximately 10 dollars of worth for every dollar of revenue. If you were to
use the same ratio, then it would be suggested that snapchat's valuation is
approximately 3.7 billion dollars.

There are also LOTS of factors such as is the company profitable, what do
their margins look like, what does future growth look like (as often share
price is also dependent on growth expectations), etc. My understanding is they
were anticipating just shy of a billion in revenue in 2017 (which is ~ 300%
growth (which is pretty remarkable at this size). Anyways, that's how some of
these numbers come to be. (edit: spelling)

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dcgudeman
Wow I am surprised they actually have that much revenue already.

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MAGZine
FULL TEXT

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Snap Inc. is working on an initial public offering that could value the
popular virtual-messaging company at $25 billion or more, in what would be one
of the highest-profile debuts in years.

The company, formerly known as Snapchat, is preparing the paperwork for an IPO
with a view toward selling the shares as early as late March, according to
several people familiar with the matter. There’s no guarantee the four-year-
old Venice, Calif., company will proceed with a share sale on that time frame
or what its valuation might be.

If Snap, best known for allowing users to send disappearing messages from
their smartphones, moves forward as planned, it would be the biggest company
to go public on a U.S. exchange since 2014. That’s when Chinese e-commerce
company Alibaba Group Holding Ltd. debuted at a $168 billion valuation. Snap
would become the first of a small group of highly valued and closely watched
venture-backed companies, led by Uber Technologies Inc., to test the public
markets.

A level of $25 billion or more would also represent a significant premium to
Snap’s most recent valuation, which was pegged at $17.8 billion in its last
funding round in May. That would bode well for a new-issue market that until
recently suffered from reluctance on the part of public investors to match the
private valuations of many Silicon Valley startups.

Underpinning Snap’s valuation is the company’s dramatic revenue growth since
it first started running advertisements in 2014.

The company told investors earlier this year it expected revenue of between
$250 million and $350 million in 2016 and as much as $1 billion in 2017. It is
already ahead of the top end of its 2016 forecast, according to two people
familiar with the matter.

In 2015, the company generated just $60 million in revenue. It isn’t clear
whether Snap is profitable.

Snap primarily makes its money by selling advertisements on Snapchat that are
slotted in between stories contributed by media partners and video diaries
posted by its 150 million daily active users. Marketers can also purchase
location-based or event-based geofilters and “lenses” that add quirky
characteristics to photos and video.

Snap’s debut would be a boon to a technology-IPO market that has suffered from
a severe drought of new offerings. Only 19 tech companies have gone public
this year on U.S. exchanges, raising just $3.3 billion, according to Dealogic.
The overall IPO market has been weak too largely because of the dearth of tech
offerings.

Yet a spate of IPOs in September among mostly smaller technology companies
indicates the trend may be reversing. Firms that priced below their most
recent private funding round have quickly soared above it. U.S.-listed tech
companies that debuted this year are now up 65% on average as of Wednesday’s
close, according to Dealogic.

Nutanix Inc., a software company that had been valued at $2 billion privately,
priced its IPO at a valuation of $2.2 billion last week. After more than
doubling its IPO price in several days of trading, Nutanix’s valuation is now
nearly $5 billion.

A valuation of $25 billion or more would also validate Snap Chief Executive
and co-founder Evan Spiegel’s decision in 2013 to spurn a $3 billion cash
takeover offer from Facebook Inc.

While executives at some of the largest private companies, including Uber,
have said they plan to stay out of the public markets as long as possible, Mr.
Spiegel last year said at a conference that the company has a plan for an IPO
and wouldn’t field acquisition offers. He hasn’t laid out a time frame.

Snap could use some of the proceeds from an IPO as currency for acquisitions
in so-called augmented-reality or virtual-reality, one of the people said.
Snap recently changed its name from Snapchat as it moves from the main app for
which it is known, which makes virtual messages disappear and is especially
popular with teenagers. As part of that transformation, Snap recently said it
would release its first hardware product, sunglasses known as Spectacles that
are equipped with a wireless video camera.

Snap hasn’t hired any banks as it works on a public filing, known as an S-1,
people familiar with the matter said.

Snap’s chief strategy officer, Imran Khan, is part of the team that is working
on the filing, these people said. Mr. Khan joined from Credit Suisse Group AG
in 2015, where he was head of global internet investment banking and served as
a key adviser on the Alibaba IPO, at $25 billion the largest share sale in
history.

Snap has raised roughly $2.4 billion in the private markets from a wide range
of investors including Benchmark, Lightspeed Venture Partners and Fidelity
Investments.

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melvinmt
So.. what Parent is meant in the title?

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adpirz
Snap, Inc. is the new parent company of Snapchat

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melvinmt
Ah, I thought they only renamed the original company (Snapchat, Inc.), didn't
know about a new parent company.

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wehadfun
Don't use snapchat do they display ads?

I thought they were mainly used for sexting am I wrong?

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delecti
Snapchat is often used for sexting, but certainly not mainly.

Think Twitter for pictures, as a vague comparison. Quickly consumable and
disposable updates in picture form. Compare to Instagram, which has a somewhat
higher quality expectation because the posts are permanent. There's also an
expectation that people will post less frequently, while with Snapchat, it's
not unheard of to post a dozen updates in a stretch.

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gaius
IG has "stories" tho'.

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j_koreth
which from my profile, everyone uses to give their snapchat username
ironically

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georgeecollins
Given what is happening with Twitter I wonder if people will become more
skeptical of these valuations. It is not that Twitter or Snapchat is a bad
business. It just isn't that valuable.

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jonknee
Facebook was valued at $104b when it had an IPO and there was similar shock at
valuation. It's now worth $370b because they were able to monetize mobile
better than anyone else. Snapchat might fizzle out, or it might be able to
successfully pull off mobile branding advertising (opposed to the social
targeted advertising that Facebook owns). If so, watch out.

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samfisher83
Even their valuation is based on some very high growth rates. If their growth
rates drops the stock would tank.

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jonknee
> If their growth rates drops the stock would tank.

Which is the case for literally every publicly traded company.

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samfisher83
FB FCF is roughly 6B their cap is 370B. That is 60x of FCF. Most companies
aren't that extreme. If there was a slow down in Growth their fall would be
much larger then a more mature company because a majority of their valuation
is based on growth.

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jonknee
There is no denying FB is priced for growth, but it's growing like crazy while
the rich valuation is coming down. Your $6B FCF figure is from last year and
they are blowing that out of the water so far this year (+60% in the first 2
quarters). It's not fair to use today's stock price with last year's cash flow
and decide that it's extreme.

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dschiptsov
$25B for a few millions of selfies of teens.. something is wrong here.)

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iMuzz
Have you actually tried the product before?

Don't be too quick to judge.

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fullshark
I have used it and I hate it (age 30+) but can't deny its popularity

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troncheadle
Related question -- How do I choose a mutual fund / 401k / pension / etc that
is guaranteed never to take part in these insane silicon valley IPOs?

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AndrewKemendo
You mean insane silicon valley IPOs like:

Apple Google NVIDIA Facebook Intel Netflix LinkedIn Oracle Tesla Sun Twilio
Adobe Hewlett Packard AMD

Something that gives you the opposite of these returns:
[http://www.bloomberg.com/quote/BSVX:IND](http://www.bloomberg.com/quote/BSVX:IND)

~~~
troncheadle
Every company that you listed produces a product other than Ad Space /
eyeballs. Even Facebook has diversified to sell something other than ads -- I
still probably wouldn't invest, as their continued success relies on such an
ephemeral foundation -- millions of people continuing to log on to Facebook
every day. Smart money says that when I am 70 years old, people will not be
logging into Facebook every day. If they are, great for Facebook! However you
would not catch me betting my retirement money on that. Have you ever walked
in to Facebook? How the hell are they going to pay all of those engineers when
people stop caring about Facebook and the ad money stops flowing? Same goes
for Linkedin -- unless they can make a very strong play into the recruiting
space I would not bet my retirement money on their continued success. Based on
what I know about recruiting I doubt that Linkedin will be able to penetrate
-- if you want to be a personnel supplier for a Kaiser or a Chase Bank you
need deep personal connections, you need to wine and dine, you need to go
golfing. They aren't amenable to the speed dating model the internet
encourages. They want a man or woman they can trust who can demonstrate their
value transparently. But I digress.

Snapchat sells ad space. That, to me, is not a sustainable business model. Ask
traditional publishers how that model worked when the took it to the web.
Won't work (in the long run) for Snapchat either. I think it's an entirely
different class of business than AMD, Sun, Tesla, etc.

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adventured
> Every company that you listed produces a product other than Ad Space /
> eyeballs. Even Facebook has diversified to sell something other than ads

That's an exaggeration to put it mildly. Facebook is getting nearly all of
their $22+ billion in sales from ads. They have practically no revenue
diversification. Google is the same. So there's nearly a trillion dollars in
market cap courtesy of ads.

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woodruffw
I've been using Snapchat for around 3 years. It's probably the only purely
social network I regularly use anymore, which is a testament to its staying
power.

That being said, I've noticed numerous changes over the past half year or so
that have lessened my tendency to use it. There are ads _everywhere_ \- on the
Stories page, _inside_ stories, on filters, and so forth. Performance gets
worse with almost every release, which would be understandable were it not for
the fact that the end user product has remained functionally identical for the
last year or so. The new "Memories" feature, which I've never bothered to
enable, feels like a Twitter-like step back from the original Snapchat model
(transient, temporary photos).

It'll be interesting to see how Snapchat reconciles this massive IPO with its
users interests. As an end user, I don't feel particularly optimistic.

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themagician
It's all the same. Facebook, Twitter, Instagram, Snapchat. People want a free
way to broadcast to their friends. Someone invents a service that does that.
Slowly ads take over. Now the stream needs to be "curated". It's no longer a
timeline. It's no longer sensible. Now you can no longer reliably broadcast to
your friends. People search for a new service that did what the old service
used to do. They don't even realize that's what they are doing, but that's
what they are doing. I've done this myself now what, a half dozen times? Every
2 years you have to do it again.

It's the same damn model. It's all the same thing. Sometimes I feel like I'm
taking crazy pills. Does no one see this?

Snapchat will rule until he ads take over. Your stories will slowly be
interrupted by ads. Then your stories will fall out of time sync and you'll
only get some updates or a "Featured Updates" or some other features that's
really just a way to prioritize and guarantee ad delivery. And while this is
happening someone will put out something new, that essentially does what
Snapchat originally did in a slightly different format. Maybe square instead
of portrait or GIF or Live Photo or whatever. But it's all the same thing.
This game will continue forever.

All people want is a way to broadcast into a stream of content, and view other
people's content in a timeline. That's it. It works for a while until you get
too big. Then you can't pay for it and you have to start inject ads and
resorting the timeline until it's no longer a timeline or it's a timeline full
of all this stuff no one ever wanted or asked for.

When I was 15 I'd get home from school and run to my computer to check my
favorite message board. I'd hit "New Posts" and see all the content from my
friends. Cool new video game discussion, new video card benchmarks, some
photos someone uploaded, some rant. Honestly, nothing has really changed in 15
years except the format of the content has been continuously updated to be
technically (and culturally) relevant. But a post is still a post.

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jonknee
I would argue that Snapchat's ephemeral nature is quite a bit different than
Facebook/Twitter/Instagram (it also makes it easier and cheaper to scale).
Snapchat is similar to TV in a lot of ways and is going down a similar brand
based advertising path.

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Jordrok
Only on a superficial level. How often do you really find yourself looking up
your friends' five year old Facebook posts? On Twitter, the UI actively fights
back even when you want to look at old tweets. Anything that drops off of the
front page of the timeline is as good as gone, Snapchat just formalizes it.

And for what it's worth, TV is becoming less and less TV-like every day, now
that we have Netflix and on-demand everything.

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flycaliguy
I agree as far as likes, status updates and so on go. For photos though,
especially profile pictures, Facebook serves as a timeline of somebody's life.
I've been going to school with young people lately and I'm blown away that
their profile picture album can trace back to childhood.

It's freaky, I'm grateful to have been able to slide through my youth without
public photographic evidence.

