Snap Inc.: Snapchat IPO Could Be the Hottest of 2017

Snapchat IPOSnapchat IPO Could Be the Hottest of 2017

“Snapchat,” the photo and video sharing app, could be next year’s hottest initial public offering (IPO). In fact, it could beat Alibaba Group Holding Ltd’s (NYSE:BABA) record, by making its Wall Street debut at $25.0 billion.

Snap Inc., or Snapchat as you might better know it, is the app that gives users only 10 seconds or less to appreciate members’ photos. It might reward investors with a $25.0 billion (or higher) IPO in 2017.

Snapchat was founded in September 2011. It became Snap Inc. earlier this year. A Snapchat IPO could be a done deal by the end of March, according to The Wall Street Journal. And the IPO could establish a new record. (Source: “Snapchat Parent Working on IPO Valuing Firm at $25 Billion or More,” The Wall Street Journal, October 6, 2016.)

The last time there was such excitement about an IPO on Wall Street was when Alibaba listed its shares on the New York Stock Exchange (NYSE) in 2014 after having been public in China for five years. Snapchat’s premise might be its 10-second-or-less message longevity, but the company’s managers are ambitious. They are targeting revenues of $250.0 million to $350.0 million this year. Last year they made $60.0 million. They plan to reach $1.0 billion in 2017.

Snapchat Has Bold Targets

These are the kinds of numbers that will help propel a Snapchat IPO to its bold targets; certainly it should grab investors’ attention. (Source: “Snapchat’s ad revenue to reach near $1 billion by 2017, says report,” CNBC, September 6, 2016.)

One of the reasons for the excitement is that other social media web sites have failed to meet expectations. The $25.0 billion IPO is more than hype. Last May, Snapchat, or Snap Inc., was valued at $17.0 billion, according to its latest fundraising effort. (Source: The Wall Street Journal, op cit.)

Twitter Inc (NYSE:TWTR), meanwhile, has failed to meet expectations. After Twitter’s IPO, the social network has stagnated to the point that it has become a big acquisition target. Snapchat has grown faster, while Twitter’s user growth rate has slowed down. As for Snap Inc. itself, the company has decided to avoid any comments about its IPO plans.

Here’s the Case for Snapchat’s Potentially Record-Breaking IPO  

Snapchat has gained great popularity among teenagers and young adults, with messages that disappear soon after being seen by their recipients, and it officially claims “over 100 million” users. But the company wants to expand its scope. To do this, it will certainly need more tools to entice user growth and expand the number of services it offers.

One of the first enticements will likely come in the form of connected mini-camera-equipped goggles, the so-called “Spectacles.” (Source: “Snapchat’s camcorder goggles are creepy cool and kind of brilliant,” Recode, September 24, 2016.)

This will be presented as a different product to the now well-known Snapchat messaging service. It also served as the chance for the company to launch a re-branding.

Snapchat became Snap Inc. to show users and investors that it was no longer limited to a single product. But to reach a $25.0 billion IPO, Snapchat needs more than self-destructing messages and the Spectacles, even if they allow users to record exactly what they are seeing without having to look for one’s phone.

Does the company have what it takes to get you interested in its IPO? The company hopes to persuade you by making its case for ad revenue growth. Next year, it could hit $1.0 billion worldwide, according to eMarketer, Inc., a research company. (Source: CNBC, op cit.)

The combination of user and ad growth, along with product diversification, is pushing the expected Snapchat IPO value to $25.0 billion or higher. The number of sector companies to dare to embark on Wall Street has slowed in recent years. Growing concerns over a new “tech bubble” in the valuations of unlisted startups has pulled the rug out from under IPO enthusiasm.

But Snapchat’s boss has played a cool game so far. He has played hard-to-get, and it may have worked. Snapchat founder and CEO Evan Spiegel has so far refused to sell his company. He smartly rejected an offer from Facebook Inc (NASDAQ:FB) in 2013 for $3.0 billion. Unlike Uber Technologies Inc., however, whose driverless car ambitions—not to mention its social disruption potential—put too much risk ahead of an IPO, Snapchat is clearly headed to Wall Street.