Snap, the parent company of Snapchat, cited Brexit as a potential risk for anyone considering buying stock in its business when it filed for a $3 billion (£2.4 billion) IPO on Thursday.
The secretive company, headquartered in Venice, California, wrote in its S-1 IPO filing that it plans to base a "significant portion" of its business in the UK. It also intends to register some of its intellectual property in the UK.
"Exposure to United Kingdom political developments, including the outcome of the referendum on membership in the European Union, could be costly and difficult to comply with and could seriously harm our business," Snap wrote in the filing.
Last month, Snap announced that it intended to make London its non-US hub, which was interpreted to mean its international headquarters. Snap confirmed it would not be routing sales made in the UK through other European countries for tax reasons, saying sales in countries where Snap does not have a local office or salesforce would also be channelled through the UK.
Snap first opened its UK office in 2015, and it now has 75 staff members across a three-story office in Soho, many of whom have been hired from rival tech firms.
In addition to the Brexit risk, Snap said in the filing that other investor risks include:
- unfavourable media coverage
- rapidly growing company costs
- hackers
- loss of key personnel or failure to attract other high-quality personnel in the future
- the fact that the cofounders have too much control
- Snap's reliance on Google's cloud platform
- potentially damaging acquisitions
- competition from Apple, Facebook, Google (including YouTube), Twitter, Line, and others
- new tax legislation
- the fact that Snap has never turned a profit and that it may never do so
Here's everything Snap had to say about Brexit:
Exposure to United Kingdom political developments, including the outcome of the referendum on membership in the European Union, could be costly and difficult to comply with and could seriously harm our business.
In June 2016, a referendum was passed in the United Kingdom to leave the European Union, commonly referred to as 'Brexit.'
This decision creates an uncertain political and economic environment in the United Kingdom and other European Union countries, even though the formal process for leaving the European Union may take years to complete.
We have licensed a portion of our intellectual property to our United Kingdom subsidiary and intend to base a significant portion of our non-U.S. operations in the United Kingdom.
The long-term nature of the United Kingdom’s relationship with the European Union is unclear and there is considerable uncertainty when any relationship will be agreed and implemented.
The political and economic instability created by Brexit has caused and may continue to cause significant volatility in global financial markets and uncertainty regarding the regulation of data protection in the United Kingdom.
Brexit could also have the effect of disrupting the free movement of goods, services, and people between the United Kingdom, the European Union, and elsewhere.
The full effect of Brexit is uncertain and depends on any agreements the United Kingdom may make to retain access to European Union markets. Consequently, no assurance can be given about the impact of the outcome and our business, including operational and tax policies, may be seriously harmed or require reassessment if our European operations or presence become a significant part of our business.
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