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Snapchat IPO: Share Pricing Values Company at Up to $22 Billion

Snap Inc., the parent company of Snapchat, expects stock in its initial public offering to sell between $14 and $16 per share — valuing the company at $19.5 billion to $22.2 billion.

With that price range, disclosed Thursday in an SEC filing, Snap expects net proceeds from the IPO to be $2.1 billion (or $2.3 billion if the underwriters fully exercise their purchase options) at the $15-per-share price. It would raise up to $3.68 billion total at $16 per share. The company registered to sell 230 million shares, including 30 million that underwriters have the option to purchase.

By comparison, Facebook’s IPO in 2012 at $38 per share valued the company at $104 billion and Alibaba Group’s public offering two years ago gave it a valuation of nearly $170 billion.

Snap, based in Venice, Calif., has seen its revenue boom while its losses have also soared. Last year, it generated $405 million in revenue, up nearly seven-fold from the year prior, but posted a net loss of $515 million last year (versus a net loss of $373 million for the year ended Dec. 31, 2015). Snapchat had 158 million daily active users for the fourth quarter of 2016, an increase of 48% year over year (but up only 3% sequentially from 153 million in Q3).

Snapchat began life as a service that lets users send each other messages that evaporate within 10 seconds of the recipient viewing them, co-founded by CEO Evan Spiegel in 2011 when he was a student at Stanford University. If the IPO goes out at $16 per share, Spiegel would have a net worth of more than $4 billion.

The service has since expanded to include Stories — which disappear after 24 hours (and is a feature Instagram has successfully copied) — and Discover, a section for media content with partners that include ESPN, CNN, BuzzFeed, Comedy Central, the NFL, Vice Media and NBC’s “Saturday Night Live” and “The Tonight Show Starring Jimmy Fallon.” Last year Snap paid content partners $57.8 million under ad-revenue sharing agreements (up from $9.6 million in 2015).

Snap chairman Michael Lynton, an early investor in the company, last month quit as CEO of Sony Pictures Entertainment citing a desire to focus his attentions on Snap. Lynton has served on the Snap board since April 2013 and has been chairman since September 2016.

The company officially changed its name from Snapchat to Snap Inc. last fall, when it announced a line of video-enabled sunglasses called Spectacles. So far, the $130 video glass have not generated significant revenue, according to Snap. It now describes itself as “a camera company” and says in the company’s overview, “We believe that reinventing the camera represents our greatest opportunity to improve the way that people live and communicate.”

The company says Snapchat users create more than 2.5 billion messages and posts every day and that on average they visit the app more than 18 times per day, spending 25-30 minutes on Snapchat daily.

Along with its revenue and user growth, Snap’s workforce more than tripled last year. It had 1,859 full-time employees as of Dec. 31, 2016, up from 600 a year earlier.

Snap disclosed in its IPO filing that it has agreed to spend $2 billion with Google over the next five years for cloud services. In an update to the original filing, the company revealed a $1 billion commitment with Amazon Web Services over five years.

Snap generates the bulk of its revenue from North America. In Q4 2016, it had $165.7 million in total sales, and 88% of that ($145.4 million) was from North America; Snap reported $14.7 million in European sales and $5.7 million from the rest of the world for the period.

Snap has applied to list on the New York Stock Exchange with the symbol “SNAP.” The IPO’s lead underwriters are Morgan Stanley and Goldman Sachs.

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