One of the most anticipated IPO’s is finally happening – SNAP will go public in an effort to raise up to $3 billion. The company is best known for its messaging app Snapchat, which is primarily an image sharing network. It’s hugely popular among younger people. Of the estimated 50 million Snapchat users, the median age is 18. In fact, teens seem to be opting for it over Facebook, whose average user’s age is closer to 40. The app was started by Stanford University classmates Evan Spiegel, Bobby Murphy, and Reggie Brown back in 2011. Its original purpose was to be a selfie app, which allowed users to share images that were only available for a very short amount of time. The purpose of having the images only be temporary was to encourage users to continuously create more content, thereby engaging with the app more often. However, they came up with the idea after Brown told Spiegel about a picture he wishes he hadn’t sent someone. Brown outright said he wished there was an app that would allow you to send “disappearing photos.” Spiegel decided it was a genius idea and immediately recruited Murphy to help them develop their new app. It was first called Picaboo, but two months after its debut, they relaunched it as Snapchat. It has since evolved into a combination of private messaging app and shared public content platform. The service completely confounded the potential investors the y originally approached. No one could fathom why the public would want to send disappearing photos. And it certainly was not an instant hit – before relaunching as Snapchat, the Picaboo app only had 127 users. It was about that time that the three founders had a falling out, which ended in Brown leaving the company and Spiegel and Murphy having to roll the app out under a new name due to a name conflict with a photo-book company. It took some high school kids to figure out how to make Snapchat an app that people actually wanted, though. In the fall of 2011, the company noticed that usage peaked between 9 a.m. and 3 p.m. among users at an Orange County, California high school. Spiegel’s mother had told her niece about the app, and she and her classmates quickly embraced it as a way to pass notes during class. The magic for them was that it left behind no evidence. By spring of 2012, it had spread to even more schools and users had surged to over 100,000. Shortly thereafter, a $425,000 investment from Lightspeed Venture Partners’ Jeremy Liew allowed Snapchat to expand their infrastructure, bringing the company’s valuation to around $4.25 million. Now, the company is estimated to privately be valued at $17.8 billion. Investors expect the public offering could lift that valuation to as high as $25 billion – that’s a 62x price-to-sales ratio. For comparison, Facebook’s ratio is just 13x. As of the end of 2016, Snap reported its service had 158 million active daily users, with an average of 2.5 billion “snaps” created on the app every day. Interestingly shares will be nonvoting stock, meaning investors won’t have any ability to influence the company’s direction. Regardless the young inventors of Snapchat are about to see their wealth skyrocket. From what I understand Spiegel and co-founder Robert Murphy each own 21.8% of the Class A stock, and the public offering will officially make Snap’s cofounders a couple of the world’s youngest billionaires. The company will trade under the ticker “SNAP” on the NYSE.
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