Two weeks ago, when Snapchat's parent company Snap Inc. first filed its IPO prospectus, we wrote about how insanely expensive Snap's stock was likely to be. At that price, the offering could value Snap at $22 billion-an eye-popping valuation given its recent losses, but still on the low end of its private-market valuation.
Snap updated its filing with the Securities and Exchange Commission, noting it will sell 145 million Class A shares, with an additional 55 million offered by selling stockholders.
The firm has set its value range between $19.5bn and $22bn, with share prices now expected to be available at $14 to $16 a pop on the New York Stock Exchange. Twitter's shares debuted at about 45 times the company's sales. Snap's earliest investor, Lightspeed Venture Partners, could make as much as $74 million. "They want to avoid setting a range and then price below the range", said Kathleen Smith, principal at Renaissance Capital, which manages IPO-focused exchange traded funds.
Snap, which made its fame with an app that sends ephemeral photo and video messages, describes itself as a "camera company".
Revenues surged to $404.5 million last year from $58.7 million in 2015, but Snap posted a net loss of $514.6 million against $372.9 million a year earlier, and its user growth slowed in the second half of 2016.
Snap's co-founders Evan Spiegel and Bobby Murphy will hold 14.5 percent of Class A shares each, after the offering, down from 21.8 percent. Both Murphy and Spiegel are the biggest shareholders in the company, and together they will control about 89 percent of voting rights in Snap once it's a public entity. Holders of class B stock are entitled to one vote, and it is convertible into one share of class A stock. It generates the majority of its revenue from advertising, seeking to challenge the dominance of existing internet giants. Currently, the platform boasts 158 million users. Morgan Stanley, Goldman Sachs, J.P. Morgan, Deutsche Bank, Barclays, Credit Suisse and Allen & Company are the joint bookrunners on the deal.