Tech giant Snapchat set to float on the New York Stock Exchange
SNAP flotation expected to be the biggest ever IPO
by Abi Moses on 3rd February, 2017 and updated 10th February, 2017 10:26am
Californian-based tech firm Snap, the owners of the popular messaging app, Snapchat, have announced they are due to sell its shares on the US stock market.
The flotation is expected to value the business at between $20bn and $25bn, with Snap hoping to raise around $3bn through an Initial Public Offering (IPO).
Snap currently has approximately 160 million daily users but whilst revenue grew by almost 600% last year, high marketing and research costs mean the company is yet to turn a profit. Snap's losses for 2016 were confirmed to be an eye-watering $515m.
How can a company with such high losses be so valuable?
Despite their continuously high losses, many experts and would-be investors believe Snapchat can potentially become 'the next Facebook'.
CCS Insights analyst Martin Garner said "If it can repeat the Facebook story to some extent, it's going to be hugely profitable."
Most of Snapchat's revenue is generated through advertising and with over half of Snapchat's users aged between 13 and 24, it is therefore seen as an appealing way for companies to reach a younger audience.
The one area of concern for potential Snap investors is longevity in what is a very saturated and competitive market space amongst the Silicon Valley giants. Snap recognises Facebook, Twitter and Google-owned YouTube as its competitors for user's attention. Its tally of 160 million daily users currently leaves it some way short of the 1.2 billion users brought in by market leaders Facebook each day.
On the back of Snapchat's increasing popularity, Facebook has recently applied new filters and slideshow features to its own photo-sharing app; Instagram.
CCS Insights, Gardner, believes "a lot of people think Facebook are losing its younger users to Snapchat. There's a lot of evidence Facebook is copying Snapchat's features."
Snap co-founder and chief executive, Evan Spiegel, turned down an offer of $3bn from Facebook's Mark Zuckerberg to purchase the company just over three years ago and is now set for a huge windfall when the company floats on the New York Stock Exchange.
The share sale is expected to take place next month under the symbol SNAP. For more information on trading shares, head over to our homepage where you will find a host of brokers to make use of.
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