The secrecy with which Snap Inc. is approaching its pending initial public offering is becoming the stuff of legends. Investors, rightfully, are beginning to wonder whether Snapchat is going to stumble out of the gate in a repeat performance of Facebook Inc (NASDAQ:FB) in 2012.
Frankly, I don’t really care.
Why’s that you ask? How could I not be excited about Snapchat, the greatest thing since sliced bread? Easy. I’ve never been a fan of initial public offerings and I’m not about to start now.
The history of IPOs is littered with overhyped companies whose shares could be bought 12-24 months later for less than the IPO price.
Take Facebook, for example. It went public on May 18, 2012, at an initial price of $38 per share, closing its first day of trading gaining a whopping 23 cents; it then proceeded to spiral downward over the summer hitting an all-time low of $17.55 less than four months into its life as a public company.
Four years later, Mark Zuckerberg & Co. can laugh about things not going entirely as planned, but it wasn’t pretty initially with lawsuits flying off the shelf as a result of Nasdaq’s aborted opening of trading for Facebook stock.
Now it seems Snapchat co-founders Evan Spiegel and Bobby Murphy, two guys still in their 20s who are at a point in their lives when they should be having fun, are instead getting all paranoid about pulling off their IPO without a glitch or media leak.
Ain’t going to happen, boys.
You can utilize all the disappearing Snapchat messages you want, but there’s no way someone’s not going to spill the beans prior to going public in March; even with confidentially filed IPO documents, something that’s become more common since the Jumpstart Our Business Startups (JOBS) Act, which came into effect in April 2012.
While it soon could be possible for companies going public to wait until 15 days before their IPO roadshow to reveal their filings. According to the Wall Street Journal, 850 companies have filed confidentially since June 2013. Just another reason to loathe IPOs.
Now back to Snapchat.
The problem that I see with the company is that it’s being so secretive about its business that it’s hampering its ability to excite retail and institutional investors. Sure, it did raise $1.8 billion in Series F funding in 2016 that valued the company post-money at $20 billion; some estimates putting the valuation as high as $40 billion, an insane amount for a company who generated just $59 million in revenue in 2015.
However, some see Snapchat raking in the dough from advertisers in 2017 and beyond. Snap Inc., eMarketer estimates, generated $370 million in digital ad revenues in 2016, should make $940 million in 2017, and as much as $1.76 billion in 2018.