Low IPO Fee for Snapchat

The banks working on Snap Inc.’s IPO will be sharing 2.5% of the money raised.


The 2.5% fee would be the third-lowest percentage ever paid in a U.S. technology company IPO over $1 billion, according to Dealogic. A portion of the Snap fee, 0.5% of the proceeds, is an incentive fee payable at Snap’s discretion, the people said. In addition to paying a low rate to its IPO banks, Snap was able to secure a $1.2 billion credit line from most of them to fund its growth, according to people familiar with the matter, a large loan for a company of its size. Snap was expected to generate revenue of just over $350 million in 2016.

Snapchat certainly seems to be running the show, though I still don't get the hype. Anyone surprised by the relatively low fees?

 

Might as well just suck Spiegel's dick while they're at it.

serious follow-up : I agree with above, it's marketing for the bank. Snapchat is a big name that's floating this year around every business sector, so when corporates get word that a bank sealed it with Snapchat, they'll want that bank.

Basically, sucking Spiegel's dick for free to get opportunities to suck dick for millions later on. Its a hooker game.

 

These investment banks are fucktards. The Office of the comptroller of the currency needs to put the smack down on these credit facilities.

 
Best Response

There have only been 17 tech IPOs in history over $1b. The max fee paid was 6.25%, and the group's average was 3.75%.

The two companies that offered lower fees were Alibaba (1.2%) and Facebook (1.1%). Google paid 2.8% and Twitter paid 3.25%. Snapchat's fees seem to be in line with the crowd, and Spiegel can keep his dick in his pants.

 

Haha, I hear you. It's a joke.

bug-me-not:

Read the s-1 filing, can anyone please explain this valuation to me, its insane. Never achieve or maintain profitability??????????

My favorite part from the s-1 filing:
"We have incurred operating losses in the past, expect to incur operating losses in the future, and may never achieve or maintain profitability."

Another red flag: SNAP is going out of its way to brand itself as a camera company. A CAMERA company! it's 2017.

Lost 900mm in 2 years
Offering 100% non-voting shares

 

Your "favorite part" is just boilerplate lawyer language I've seen on every s-1 of a non-profitable company... not that special or meaningful.

I don't work in tech but I would guess buy-side shops will use a DCF and then benchmark against FB, Twitter, etc using some sort of multiple based on a usage metric (i.e. daily active users, etc).

What's wrong with branding as a camera company? What do you think would have been a better alternative? The "social media" space is pretty saturated so I think this branding strategy makes sense and gives them multiple avenues for growth.

I think all the VCs that have made XX times their money on this would beg to disagree..

 

I think the stock will get pumped up for a bit after the IPO, but eventually falter and end up somewhere below the initial market price like Twitter. Who knows what the timeline for that all to play out looks like, but it'll be a last loser game. I remember when it was unimaginable for people that Twitter would keep bleeding as hard as it was despite the growing user base, yet here we are and they aren't quite impressing people with results in that category either.

 

My favorite part from the s-1 filing: “We have incurred operating losses in the past, expect to incur operating losses in the future, and may never achieve or maintain profitability.”

Another red flag: SNAP is going out of its way to brand itself as a camera company. A CAMERA company! it's 2017.

Lost 900mm in 2 years Offering 100% non-voting shares

but hey, the millennials might just short squeeze in in the days after IPO

 

Facebook had a profitable business model, much high user growth and userbase (700m at the time, 1.2 bn now), a broad revenue stream and net profit (1 bn at the time). Snap doesn't even know what it is...a "camera" company? C'mon...

"Never believe in anything until it has been officially denied"
 

Misuse of funds, yes. Although they got quite lucky with the returns and success of Snapchat, which I am sure they will use to help justify it.

Just an Undergrad trying to get a job. Something you disagree or dislike about my posts? Let me know by PM'ing me or commenting constructive criticism.
 

Went to a high school nearby. Definitely not a rags to riches story. St. Francis is the most entitled/pretentious school in the bay area. 24 million isn't as much for them as you think, just a bunch of crusty rich parents throwing around money there.

Although it is good to see they have a good investment philosophy and got out of the stock early. Finna tank in a minute.

 

Understanding that some tech companies are all about user growth I still find it difficult to ascribe that much value to companies that do not make money. I guess you are ignoring the financials temporarily and assuming that anything that has xxx million users has got to be worth a lot if you can get a dollar of value a year from them minimum. But hey, what do I know, I didn't think FB would be a great investment...oops!

I also think that a company that only caters to essentially having fun could face a lot of trouble if / when it falls out of vogue like a Twitter... too risky for this guy

 

Social networking as an industry is in a bubble of its own. Honestly, I don't think we'll see a social network that comes even remotely close to achieving the kind of success Facebook has. It's a fad-driven industry, and most people focus their attention on 1, maybe 2 social networks at any given time. Hell, YouTube was bought for a steal 10 years ago, yet despite 1 billion monthly users and the backing of a tech behemoth, it still isn't profitable.

 

It wasn't all that long ago that MySpace was the king of social networking. I'd be willing to bet that Snapchat is out of business in 5 years.

"There's nothing you can do if you're too scared to try." - Nickel Creek
 

let's wait to see the s-1.

facebook had parabolic growth years pre-IPO and was profitable pretty much from day 1. twitter was not profitable from day 1, and we're now talking about it like it is a bad investment. google was similar to facebook, profitable from day 1, strong bottom line pre IPO.

LinkedIn is an interesting one because they had plenty of revenue but were generating losses pre-IPO, and now they're being bought by microsoft. I'd say they were a success, even though just as a matter of principle I don't like companies with negative bottom lines year after year.

I think the theme is this: you have to have a cool social network that had a revenue purpose from day 1. I think you alienate your core user base when you try to morph at their expense.

on another subject, I wonder how long this business model of "let's build something cool, get a ton of users, and then sell ad space" lasts. I know they're taking money from print, TV, radio, etc., but at some point dollar shave club and birchbox are going to run out of marketing dollars. what then?

 

I don't know what Snapchat is worth and I'm not totally bullish on the company either. However, I think some comments are way to bearish and don't understand the company or its offerings. It is more than just sharing pictures - major brands / media outlets / live sports etc. use it as a mechanism to deliver content. There is value and staying power to that beyond a typical social network. I haven't looked at the stats or done the math - my hunch would be its not $25bn but I don't think it will go the way of twitter either.

 

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I'm talking about liquid. Rich enough to have your own jet. Rich enough not to waste time. Fifty, a hundred million dollars, buddy. A player. Or nothing. See my Blog & AMA
 

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