Sources are reporting that Snap Inc. — Snapchat’s parent company — has set a valuation for itself between $19.5 billion and $22.2 billion, as the message app company gets closer to its IPO. But some investors are wondering if the company is worth the valuation it’s seeking.
According to The Wall Street Journal, while the valuation range, which equates to $14–$16 a share, is lower than the $20 billion–$25 billion range the company had originally aimed for, it would still be the largest U.S.-listed tech offering since Alibaba Group Holding Ltd.’s IPO in 2014. Snap Inc. and its underwriters will set a final IPO price based on feedback from investors.
Some investors are already leery about whether the company is worth the amount it has set. The app started out as a way for users to send messages that can only be viewed by the recipient for one to 10 seconds before it disappears forever. It has since added features for texting, video sharing, money transfers and news.
While it has 150 million users — mostly young people — the app has had slow growth in its daily average user base, as well as increasing competition from Facebook. There are also concerns about the limited control new shareholders would have over the business.
Los Angeles Times reported that the company plans to sell shares to raise about $2.3 billion in cash, which will then be used for hiring, taxes, technology, acquisitions and more. Existing shareholders plan to sell additional holdings worth $880 million, and if the initial batch sells out, the company could offer another $246 million worth of shares and existing owners another $235 million, for a total sale of $3.7 billion for 230 million shares.
Snap is expected to market the offering to mutual funds and hedge funds in meetings Monday in London, then move on to meetings in New York and other cities. The shares could be priced as soon as March 1 and begin trading the following day on the New York Stock Exchange under the ticker “SNAP.”
Since last year was the slowest for U.S.-listed tech IPOs since 2009, Snap’s IPO will be closely watched for signs of a revival.