Tech Transformers

Snapchat parent Snap sees up to $22.2 billion valuation after pricing IPO at $14 and $16 per share

Snapchat IPO set to be largest tech offering since Alibaba in 2014
Snapchat IPO set to be largest tech offering since Alibaba in 2014

Snap Inc, the owner of ephemeral messaging app Snapchat, sees its upcoming initial public offering (IPO) priced at between $14 and $16 per share, according to a regulatory filing released Thursday.

This would value the company at between $19.5 billion to $22.2 billion.

The U.S. start-up said that it was offering to sell 200 million Class-A common stock and will trade on the New York Stock exchange under the ticker "SNAP". The total offering will rise to 230 million shares if the underwriters exercise their option to purchase the additional 30 million shares up for grabs.

Snap estimates that the net proceeds from the sale of shares will be $2.1 billion or around $2.3 billion if the underwriters' option to purchase additional Class-A shares is exercised. This is on the basis of a $15 per share offer price. Net proceeds are the total capital raised minus expenses and underwriting costs.

At $16 per share, the total amount raised would be $3.6 billion.

A finger is posed next to the Snapchat app logo on an iPad.
Getty Images

"We intend to use the net proceeds we receive from this offering for general corporate purposes, including working capital, operating expenses, and capital expenditures. We may also use a portion of the net proceeds to acquire complementary businesses, products, services, or technologies," the company's S-1 filing with the U.S. Security and Exchange Commission said.

"However, we are not contemplating any material acquisitions at this time."

Co-founder and chief executive Evan Spiegel, and chief technology officer Robert Murphy, will hold 88.5 percent of the voting structure after the IPO. This is because they hold Class-C stock, which has voting rights. The Class-A shares going on the market have no voting rights.

"Mr Spiegel and Mr Murphy, and potentially either one of them alone, have the ability to control the outcome of all matters submitted to our stockholders for approval, including the election, removal, and replacement of directors and any merger, consolidation, or sale of all or substantially all of our assets," the filing said.

Snap's IPO is being closely watched as it could set the tone for other technology offerings in 2017. Last year saw a dearth of U.S. listings, but experts are predicting that the market could thaw this year.

Snap makes its money through advertising and will need to convince potential investors that its app is not just a fad. In 2016, the company generated revenue of $404.5 million, a sixfold increase on the $58.7 million made in 2015, according to a regulatory filing with the U.S. Securities and Exchange Commission. However, net losses widened to $514.6 million last year, from $372.9 million the year before.

At the end of 2016, Snap had 158 million daily active users, up 48 percent from the same time the year before. But in the fourth quarter of 2016, year-on-year growth of users fell, which Snap put down to increased competition as well as product performance issues stemming from updates to its app.

Snap has seen rising competition from the likes of Facebook, which has released its own Snapchat-like product called "Stories", as well as Instagram Stories, another service akin to the disappearing messaging app.

- Additional reporting by Leslie Picker