Snapchat's $24 Billion Valuation Sets A High Bar For Its Future

Snapchat CEO Evan Spiegel

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Snapchat's parent company is expected to be valued at about $24 billion in its IPO, setting an high bar bar for a company that lost $515 million last year.

Investors will buy the company's stock for an initial price of $17 a share, according to reports, creating expectations for dramatic growth in users and revenue at the company, which will spend the coming years trying to live up to those expectations.

Snap Inc, Snapchat's parent company, brought in $405 million in revenue in 2016, while spending $925 million.

The $24 billion valuation is slightly above the range the company aimed for two weeks ago when its IPO plans were made public. It's not uncommon for the price of shares in an IPO to rise slightly from the company's initial estimate. About $3.4 billion worth of Snap shares will be sold, with existing investors taking home about $935 million from the sale and the company pocketing the rest. The sale will be the biggest tech IPO since the Chinese e-commerce giant Alibaba raised $22 billion in 2014.

At $24 billion, Snap is still considerably less valuable than the $104 billion Facebook was valued at when it went public in 2012, but more than twice Twitter's current $11 billion valuation.

And speaking of Snapchat's 140-character-cousin: Twitter has become a cautionary tale for what happens when a hot social media company goes public but can't meaningfully grow its user base or live up to a sky-high valuation (Twitter's market value hit almost $25 billion on its first day of trading). Some analysts and investors fear that the same fate could befall Snapchat, whose user growth has slowed down recently.

The company initially targeted a valuation in its IPO between $20 and $25 billion, the Wall Street Journal reported. At the end of 2016, the company calculated that the fair value of its shares was $16.33, according to its IPO filing.

from BuzzFeed - Tech https://www.buzzfeed.com/matthewzeitlin/snapchats-24-billion-valuation-sets-high-bar-for-future?utm_term=4ldqpia