I often get asked how it is possible that a company that lost over half a billion dollars last year will shortly be listing in a valuation that could be greater than $25 billion, raising $3 billion in the process. Yes, we both know what I’m talking about – the most discussed tech IPO since Facebook, Snap Inc., known by its users as Snapchat.
It started off with humble beginnings in 2011 as three friends met at Stanford University, initially developing a photo sharing app called Picaboo which, importantly and differently to other picture messaging services, only allowed the recipient to view the photo for a pre-determined time period. The photo then auto-deletes after this. Then, in 2013, there was a possible takeover by Facebook to the tune of an offered $3 billion on a 100% cash basis – but this was rejected by Snap Inc.
As it stands, the growth has been rapid and they now have over 161 daily million users – with a vast majority of this coming from the 16-30 years age bracket. But what sets it apart from other messaging apps like WhatsApp? Firstly, something called lenses, which allow users to edit pictures with different cartoon pictures: for example, by placing a rainbow on the picture or a set of rabbit ears on the photo of a person.
Then it adds “My Story”: this allows a timeline of pictures and videos to be broadcasted. Lastly, and the part I find most intriguing, is the addition of the Spectacles: not a software application but ultimately a physical pair of sunglasses with a camera on one lens which allows 10-second videos be uploaded to the My Story timeline. This is also the pertinent point in the company’s S1 filing for the IPO: it doesn’t call itself a messaging service, but actually a camera company. I think this has been intentional so as to differentiate it from Facebook and Twitter – a clever move indeed.
Various comparisons of the share price’s performance after the IPO, following the success of Facebook and the failure of Twitter, will be made. For me, the valuation of $25 billion does seem fully loaded but the innovative features, not just software but now with hardware such as the Spectacles, and the user growth makes this an exciting prospect.
Jordan Hiscott, Chief Trader
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