Going public is not always a snap to raise capital (pun intended)

New tech company IPOs are always a cause for excitement in the financial market. Talk of Unicorns and big money deals abound, and industry gossip mavens wait with bated breath for news of Zynga- or Facebook-style shenanigans. But sometimes the story isn’t much of a story, at least at first, and a well-known company’s much-anticipated IPO just does not live up to the hype. This is exactly the case with Snap Inc. (NYSE: SNAP), when the creators of messaging app Snapchat publicly released their IPO filing through the SEC in February of 2017.

Known primarily for the hit social media app Snapchat, Snap Inc. was founded by Stanford students Evan Spiegel and Bobby Murphy in July of 2011, boasting more than 30 million users just one year later.

Snapchat added video messaging in 2013 and “stories” or sets of serial messages thereafter. Expanding to Android phones significantly expanded the app’s customer base and had investors as eager to see an offer from Snap as from other IPO white whales like Airbnb and Uber – and a bellwether to help those companies plan their own offerings, or perhaps abstain from making one this year. Given Snap’s disappointing performance, those two unicorns might decide to stay in their magic forest a little while longer and wait for better conditions to make their offers.

Snap’s IPO has seen a mixed reaction from investors. Valued at between $25 billion and $35 billion, the company expects to raise only $4B. These numbers are low for the tech sector, but other factors also play into a lack of investor enthusiasm. For one thing, Snap’s attempt to sell photo-ready branded glasses called Snaptacles has thus far been unsuccessful, causing the company to plan and increase distribution in hopes the new product will take off. Snap has always positioned itself as a media and camera company first and hopes to reinvent the way modern people use and enjoy photography. As such, an initial foray into photography outside the app should have done better numbers to please investors.

Also problematic is the founders’ unusual stranglehold over the controlling shares. Together, Murphy and Spiegel will hold roughly 89% of the available voting shares, which means Snap is offering non-voting shares, an unheard-of move for an IPO in the United States and one that has made investors quite nervous. Competition is also a factor as Facebook and Instagram (both arguably more recognizable brands than Snapchat) are launching products which ape Snapchat’s functionality. Most of Snapchat’s users are between 18 and 34 years of age, and as such are more prone to switch from brand to brand based on trends, making it more difficult for Snap to maintain a bedrock of users long into its history. As such, Snapchat has seen a steady slowing of revenue.

Of course the world of IPOs and SEC filings is always changing and evolving , and can be something of a minefield for companies who do not engage a specialized financial printing company in a major fiscal hub like New York City. Financial printing firms employ experts in IPOs, SEC filings, EDGAR, XBRL and more, and are ready to smooth any major reported events like a merger or IPO.

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