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Snapchat's parent kicks off $3.9b sharemarket float, the first since Twitter three years ago

Snap, the maker of the messaging phenomenon Snapchat, filed documents for a US share market float, the first big social-media company to do so since Twitter more than three years ago.

The parent of the disappearing-photo app filed its IPO documents with an initial size of $US3 billion ($3.9 billion), a placeholder amount used to calculate fees that may change.

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Miranda Kerr engaged to Snapchat billionaire

The Australian supermodel in July said 'yes' to American Snapchat billionaire Evan Spiegel.

Snap plans to raise as much as $US4 billion in the share offer expected to come in March, people familiar with the matter have said. That would give it a market value of as much as $US25 billion and make its chief executive Evan Spiegel and his Australian supermodel fiancee Miranda Kerr one of the world's richest young couples.

The prospectus filed on Thursday revealed that the company posted a net loss of $US515 million in 2016, on revenue of $US404 million. That compares with a loss of $US382 million in 2015, on revenue of $US59 million.

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Snapchat has more than 158 million daily active users, the prospectus shows. Quarterly average revenue per user on a global basis climbed to $US1.05 in the fourth quarter of 2016, compared with US31¢ in the year-earlier period.

Last year, Snapchat filed confidentially for an IPO with the US Securities and Exchange Commission, under the Jumpstart Our Business Startups Act. The Jobs Act is a venue for companies with revenue of less than $US1 billion to file privately and work out details with the SEC away from the public eye.

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Founders to keep control

The IPO prospectus is the first opportunity for outsiders to get a closer look into a company that's known for, among other things, its culture of secrecy. The next step will be the roadshow, in which Mr Spiegel and his management team will endeavour to explain the company's strategy and prospects to potential investors.

According to the filing, Snap will become the first US company to go public with shares on offer not granting voting rights to sharemarket investors. Mr Spiegel and co-founder Robert Murphy will keep control of the company.

Mr Spiegel, a 26-year old internet entrepreneur, is the driving force behind the company. He is already amassed a $US2.1 billion fortune, according to estimates by Forbes magazine.

Having proposed to the 33-year-old Ms Kerr in July, the couple could be worth about $3.9 billion if the company after the sharemarket float. 

A notorious partier from a well-off Los Angeles family, Mr Spiegel founded Snapchat when he was a student at Stanford University five years ago studying product design and the social chair of a fraternity. 

Snapchat was initially designed for sexting – the app was used to send short video messages that erased themselves after a few seconds. But it became a hugely popular rival to Instagram and a popular medium for advertisers chasing hard-to-get younger people.

No voting rights 

Mr Spiegel turned down a $US3 billion offer for the business from Facebook three years ago. In May the company was valued at $US18 billion, according to regulatory filings, which suggest it has about 200 investors.

Mr Spiegel and Mr Murphy will maintain tight control over Snap's stock through a unique three-share class structure. The structure will give them the right of 10 votes for every share. Existing investors will have one vote for each of their shares, while new investors will have no voting rights.

Keeping tight control is common in companies closely associated with their founders, who often prefer to grow their business without being questioned by a broad array of investors. Still, offering a class of stock with no votes in an IPO is unprecedented.

Though the structure has drawn some criticism for not giving sharemarket investors the opportunity to have input, some people close to the company have argued that investors can "vote with their feet" by not buying into the IPO if they are not comfortable with the arrangements.

Morgan Stanley and Goldman Sachs are leading the sharemarket offering with JPMorgan Chase & Co. and Deutsche Bank, Barclays, Credit Suisse and Allen & Co. are also on the deal.

Snap plans to list its Class A shares on the New York Stock Exchange, under the symbol SNAP. It plans to use proceeds from the offering for general corporate purposes, which may include acquisitions, the filing shows.

Bloomberg/Reuters/BusinessDay 

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