Snapchat's parent company, Snap Inc., said in a filing Thursday that it was seeking an initial public offering valuation off up to $22 billion.
It is looking to price its IPO on Wednesday, March 1, Business Insider has learned.
The company said it was seeking to price shares at $14 to $16.
Snap is looking to list 200 million shares on the New York Stock Exchange under the ticker SNAP.
The active bookrunners are Morgan Stanley, Goldman Sachs, JPMorgan, and Deutsche Bank. Barclays, Credit Suisse, and Allen & Co. are also involved.
Here is the schedule for investors who plan to meet with the tech company:
- Friday, February 17: Mid-Atlantic
- Monday, February 20: London
- Tuesday, February 21: New York
- Wednesday, February 22: New York
- Thursday, February 23: Boston
- Friday, February 24: Midwest
- Monday, February 27: Los Angeles/San Francisco
- Tuesday, February 28: San Francisco
- Wednesday, March 1: New York pricing
Quality of engagement vs. quantity of users
The management team that will pitch the company to investors at its road show will include CEO Evan Spiegel, chief strategy officer Imran Khan, and CFO Andrew Vollero. Vollero will play a backseat role, according to one person familiar with the matter. Khan will present mainly on the company's business model, while Spiegel will talk about the product itself.
In a management meeting with sales people on Thursday morning, Spiegel said he spends 50% of his time focused on the product, 40% of his time recruiting, and 10% on things he doesn't want to do but gets paid to do (that is, running the rest of the business).
On the roadshow, Spiegel and his team are expected to emphasize quality of engagement over quantity of users, according to the person familiar with the matter. Rather than focusing exclusively on growing the number of users, Snap would rather users really enjoy the product. Spiegel is focused on innovating the product to make it more usable, and continues to believe that in order to do so, users must have higher-end phones.
Snapchat works best on iPhones, and while some problems persist on Android and other phones, Spiegel says he will not dilute the product to make it work on every phone, this person said. So unlike Facebook, which has nearly 2 billion users around the world, Snap will not focus on non-iPhone-using customers in places like the developing world, because those markets are not easily monetized. The logic is that advertisers want to reach North America and develop Europe rather than rest of world.
Similar to Facebook's roadshow, Snap is expected to simply show a video and then take questions in its meetings with larger groups.
Slowing user growth
Snap, which made its fame with an app that sends ephemeral photo and video messages, describes itself as a "camera company."
The Snapchat app had 158 million average daily active users as of the fourth quarter of 2016. The company makes the majority its money through advertising, and it booked revenue of $404.4 million last year, up from just $58.6 million in 2015. Last year the company introduced its first hardware product, camera glasses called Spectacles that retail at $130.
Snap says it plans to use the IPO funding for "general corporate purposes, including working capital, operating expenses, and capital expenditures."
The company adds that while it might purchase some "complementary businesses, products, services, or technologies," it is not anticipating any material acquisitions.
The class A stock being offered carries no voting rights. Holders of class B stock are entitled to one vote, and it is convertible into one share of class A stock. Holders of class C stock — restricted to the company's founders, CEO Evan Spiegel and chief technology officer Bobby Murphy — are entitled to 10 votes. The class C stock represents 88.5% of the voting power of the outstanding capital stock after the IPO.
"As a result, Mr. Spiegel and Mr. Murphy, and potentially either one of them alone, have the ability to control the outcome of all matters submitted to our stockholders for approval, including the election, removal, and replacement of directors and any merger, consolidation, or sale of all or substantially all of our assets," the regulatory filing reads. "If Mr. Spiegel's or Mr. Murphy's employment with us is terminated, they will continue to have the ability to exercise the same."
Snap is likely to be asked questions about how the company plans to compete in a competitive market for users and advertising dollars.
The filing shows Snapchat's user growth slowed after the launch of Instagram Stories— a feature that mimics Snapchat's flagship feature, also called Stories, which allows users to send a string of videos and images to their friends that disappear after 24 hours.
Snap's executives are also likely to be quizzed on the company's path to profitability. The company posted an annual loss of $514 million in 2016.
SEE ALSO: Snap is seeking an IPO valuation of up to $22 billion
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