Snap Inc.: Will Trump Presidency Impact Snapchat IPO?

snapchat ipoThe Future Looks Promising for a Snapchat IPO  

Talks of a Snapchat initial public offering (IPO) have been doing the rounds for a long time, and now Snap Inc. has taken another step which takes it closer to its IPO. The company’s recently launched “Spectacles” have come at a good time, and should strengthen the company’s brand further.   

Reports have come in that Snap Inc., the parent company of Snapchat, has filed confidentially for its IPO. The company filed papers with the U.S. Securities and Exchange Commission (SEC) before last week’s presidential election. Snap Inc. is targeting a valuation of about $20.0 billion-$25.0 billion in a listing that could come as soon as March 2017. Also, the company’s management is of the view that a Donald Trump presidency is not likely to have a negative impact on the business. (Source: “Snapchat Files Confidentially for IPO,” Bloomberg, November 15, 2016.)

But, given the fact that the big names in technology stock have taken a beating after Donald Trump’s win, and the fact that sentiment for the technology sector is turning bearish, there is a possibility that the Snapchat IPO could be delayed. However, the big positive is that Trump does not have a personal grudge against Snap Inc., and his lower tax policy may actually help the company. Trump has been a big critic of big and powerful technology companies, but Snap Inc. does not fit this description.  

Last month, it was reported that Snapchat had picked its team of IPO bankers, led by Morgan Stanley (NYSE:MS) and Goldman Sachs Group Inc (NYSE:GS), and that the Snap Inc. IPO may be one of the biggest IPOs in recent times.

Snapchat Spectacles Look Promising

Snap Inc.’s messaging app is a big hit among teenagers, and the company has been in the news since it introduced its connected sunglasses that can record videos that automatically get saved to your “Snapchat Memories.” Last week, the $130.00 Snapchat Spectacles went on sale through the company’s bright yellow vending machines, and they have been able to generate lot of excitement. The Spectacles record circular videos, which can then be shared by the user. At present, they are being rolled out in limited numbers.

Now that the “camera company” has generated quite a buzz with its first hardware product (which is good news for the Snap IPO), what does it have in store for the future?

Facebook Inc (NASDAQ:FB) has been copying Snapchat features for a while now, and that seems to be working fine for the company. Instagram’s “Stories,” with special-effect photos and videos that disappear, seems to be doing well. Just last month, Facebook announced a totally revamped camera interface in its main app, which is similar to that of Snapchat. The social media giant may be a tough nut to crack for Snap Inc.

But Snapchat has been able to grow its ad revenues well. The company has been rolling out new targeting options for advertisers. With the numbers for cable subscribers coming down, marketers are looking at improving their presence on social media platforms. Moreover, Snap Inc. will not have the myriad problems that accompany Facebook everywhere, the most recent one being that of misleading content and false news being shared via the social media site.

The Bottom Line on a Snap IPO  

With expected advertising revenue of $350.0 million this year and a competitor like Facebook, the camera-app maker will face an uphill task in convincing investors to buy into its growth story.

With over 150 million daily active users around the world and a projected ad revenue of $1.0 billion in 2017, the picture seems to be pretty good right now for a Snapchat IPO. The new sunglasses, Spectacles, are a great start to the company’s product expansion plans. However, with most of the social media companies moving into video and image-based online media, Snap Inc.’s sustainable competitive advantage may come into question. This might become a problem for Snapchat.