Snapchat's $4.2b IPO: New investors will have no votes

The number of Snap's daily active users grew to an average of 158 million at the end of December, up 48 per cent year on year, the company has revealed.
The number of Snap's daily active users grew to an average of 158 million at the end of December, up 48 per cent year on year, the company has revealed.PHOTO: REUTERS

Two co-founders will maintain control of company when it goes public in March

NEW YORK • Snapchat owner Snap has fired the opening salvo in its US$3 billion (S$4.2 billion) initial public offering, outlining aggressive expansion plans but offering new investors no say on how the company is run and no promise of profits either.

Snap's publication of its IPO registration document on Thursday sets the stage for its marketing campaign to convince investors to look past its widening losses and the firm grip of its founders, and focus on its rapid growth of active users.

The number of Snap's daily active users grew to an average of 158 million at the end of December, up 48 per cent year on year, the company revealed.

However, its net loss widened to US$514.6 million in 2016 from US$372.9 million the year before.

While Snap will have time to polish its marketing pitch in the run-up to the IPO planned for next month, some analysts were taken aback that it was just beginning to reap cash from its product.

Snap said in the IPO registration document it would become the first US company to go public with shares on offer not granting voting rights to stock market investors. Founders Evan Spiegel and Bobby Murphy will control the company.

Snap could be valued at between US$20 billion and US$25 billion, according to sources familiar with the situation who asked not to be named. That would give the company the richest valuation in a US technology IPO since Facebook.

Snap, which launched itself in 2012 with an app that sends messages that disappear, rebranded itself last year as a camera company and started selling US$130 video camera glasses.

It generates the majority of its revenue from advertising, seeking to challenge the dominance of Internet giants such as Facebook and Alphabet's Google.

In its IPO registration document, Snap cited Apple, Google, Twitter, Facebook and its photo-sharing platform Instagram as its competitors.

Mr Spiegel, the 26-year-old Snap co-founder, last year earned US$503,205 in salary, with a US$1 million bonus. Chief strategy officer Imran Khan, hired from investment bank Credit Suisse Group in 2014, earned US$241,539 last year with a US$5.2 million bonus. In 2015, Mr Khan also received US$145.3 million worth of Snap shares as a sign-up bonus.

Mr Spiegel and Mr Murphy will maintain tight control over Snap's stock through a unique three-share class structure. The structure will give the co-founders the right of 10 votes for every share. Existing investors will have one vote for each of their shares, while new investors will have no voting rights.

The company said it could not predict if the structure would "result in a lower trading price or greater fluctuations" in the stock.

Snap said it would use the proceeds from its IPO for general purposes, including working capital, operating expenses and capital expenditure.

REUTERS

A version of this article appeared in the print edition of The Straits Times on February 04, 2017, with the headline 'Snapchat's $4.2b IPO: New investors will have no votes'. Print Edition | Subscribe