Breakingviews: Snap’s IPO momentum could be hard to break

Snapchat's momentum could be hard to break. The soon-to-go-public messaging app whose photos vanish is seeking a valuation lower than the $20 billion or so TechCrunch reported for its most recent private fundraising. A conservative approach to pricing its shares may pique even more interest. Despite fading user growth and poor governance, the hype surrounding Snap and a dearth of new stock issues mean investors are unlikely to disappear. Snap , the parent company of Snapchat, indicated on Thursday that it would pitch its shares at between $14 and $16 apiece, implying a market capitalization between $16.2 billion and $18.5 billion. After last year's investment round, media reports suggested Snap might be aiming for a figure closer to $25 billion in its initial public offering. More from Breakingviews : Yahoo paying small price for big hacks Even at the high end of the cautious initial range, the company led by Evan Spiegel would be valued at nearly 50 times its $400 million of revenue in 2016. When Facebook was about five years old, as Snap is now, it was privately valued at about $10 billion, or roughly 35 times trailing sales. At the same time, however, Snap has burned through nearly $1 billion of cash over the last two years. And its growth in average daily users is slowing. From the third quarter to the fourth quarter, the increase was only 3 percent, to 158 million globally, against 14 percent for the equivalent periods a year earlier. What's more, perhaps the most prominent innovation unveiled in the IPO is the sale of shares with no votes. All those off-putting features should be worrying fund managers as they settle in for the Snap roaddshow. Even so, they may struggle to restrain themselves. A drip-feed of appealing nuggets preceded the official financial disclosures, putting emphasis on Snap's impressive top-line growth and its coveted youthful audience. Last year also was one of the slowest for IPOs on record, which has created pent-up demand in a buoyant market. That probably means that despite the flaws that might otherwise make a debut go soggy, Snap's will crackle and pop. For more independent commentary and analysis from Reuters Breakingviews, visit breakingviews.com

CEO and co-founder of Snapchat Evan Spiegel

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Snapchat's momentum could be hard to break. The soon-to-go-public messaging app whose photos vanish is seeking a valuation lower than the $20 billion or so TechCrunch reported for its most recent private fundraising. A conservative approach to pricing its shares may pique even more interest. Despite fading user growth and poor governance, the hype surrounding Snap and a dearth of new stock issues mean investors are unlikely to disappear.

Snap, the parent company of Snapchat, indicated on Thursday that it would pitch its shares at between $14 and $16 apiece, implying a market capitalization between $16.2 billion and $18.5 billion. After last year's investment round, media reports suggested Snap might be aiming for a figure closer to $25 billion in its initial public offering.