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?
It's a perfect storm...dearth of recent IPOs in general and it's a "cool"/"prestige" deal which banks will use to market to win other mandates.
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.
It is a demand issue, many banks want to be on the IPO for a prestige thing. In addition, they might accept a lower fee in return for future transaction fees that Snap might generate
These investment banks are fucktards. The Office of the comptroller of the currency needs to put the smack down on these credit facilities.
Morgan Stanley and the banks on the Uber loan this past summer are getting the smack down.
Wait what? Companies has had IPO deaths recently??? This is the kind of reservation that makes me not want to work at a startup.
Sorry, been living under a rock.
I thought everyone wanted action on SnapChat?
Not sure if you're serious, but dearth, not death.
dearth noun a scarcity or lack of something.
Sorry, all I saw just now was, "Luke, I am your father," - Darth Vader.
Kidding aside, I am still lost, haha.
Anyone making any money on snatchchat, other than on a short, is unfortunate
UK fees are usually 2-3% on fundraise plus 500k or so corporate finance fee. US fees are going to come down hard eventually!
What's a typical IPO fee for large US tech deals? And what about other sectors?
Back when I was in M&A we were seeing prices drop to a consistent ~1% ish, and maybe even lower for a really big deal...
Funny, I read the OP and thought '2.5% is 100bps higher than some deals...'
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.
Looks like they really could have gotten 50 bps more if not 75. Millions per underwriter.
It sounds like the banks who did the credit facility lose money overall on it.
I haven't read anything about the facilities but they'll likely be offered in view of returns from the overall deal for the firm - given banks generally won't be mandated if they don't agree to take a piece of the debt.
Haha, I hear you. It's a joke.
yeah, but I guarantee my 401k manager is excited to buy
Assuming the $25B valuation for Snap, that correlates to a 62x P/Sales ratio...SALES...not EBITDA or earnings. Seems totally inflated, but the fact they have ~160 million active daily users checking the app ~20 times a day has current and potential advertisers drooling over their user base.
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..
As someone who works in Public Finance, where you are lucky to get paid 0.5% of par, my sympathy is limited.
One word:
Unicorns
Growth versus value. I haven't looked into growth estimates but that is what drives the valuation.
Reminds me of the Video rental places during the early 90s
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.
Snap Inc has a very weird secretive culture. If you haven't read into them, I would highly recommend it. Renting houses as offices, locking people out of the office if a team is working on a secret project etc.
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
Maybe they could merge with Go Pro.
Where are you going to get shares to short?
Didn't check the prospectus, but what's the estimated re Spiegel's stake value post-IPO?
.
Snapchat IPO's $24mil Upside for... A Highschool?! (Originally Posted: 03/08/2017)
Saint Francis Highschool in Mountain View California decided to invest $15,000 in Snapchat back in 2012 under invitation from a students father who is a VC investor.
When the bell rang on 2 March 2017, the highschool unwound 2/3 of its position at $17/share to raise $24mil. No bad for a $15k investment and a further aside on rest of their shares which is worth, at its peak, about another $15-17mil!
For the parents out there, perhaps you ladies and gents should be selling your school boards on IPOs and venture ideas!
Let me know what you Apes think.
Reference: High school makes $24 million from Snap 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...
Anyone think this is a complete misuse of school funds?
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.
yeah curious to hear the list of the schools who made investments that didn't work out
Was this a public or private school? Seems odd unless they have a donated investment fund. Either way, good for them.
Dig a little and let us know what you've found out. They've fronted an Asian man to tell the news agency so you know it's good!
Private school in Mountain View, CA (Bay Area)
This is a private school.
This is a super elite school to have this kind of opportunity.
What do they plan on doing with the money?
Ebolamonkey boats n hoes
Probably invest in a few more apps. Need to keep the flow of bacon coming in. School lunches aren't cheap to keep pumping out, and ketchup isn't a vegetable
Spin off a venture fund, until it blows up. Honestly, this looks great because it happened to be a good investment. Had it turned sour, someone's gonna get hurt real baaaad.
It's $15K to a prestigious private school...no one would even hear about it if it turned sour.
Snapchat share increased by 44% or from $17 to $24 since the IPO (Originally Posted: 03/03/2017)
In this rages to riches article, a high school makes millions off of snapchat.
Do you think if I bought the Snapchat shares now I will still make money?
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.
^Rich to even richer I guess
Assuming a $3b IPO and a 15% greenshoe, that's still over $86mm in fees. Plus whatever the banks make selling the shoe (which I'm guessing will be plenty based on the hype), plus $10-15mm in financing fees on the revolver (total guess). Sounds more than fair to me.
Snapchat's $25-Billion IPO (Originally Posted: 10/14/2016)
Snapchat's parent company is working on an IPO with a target of selling its shares in the first quarter of '17. According to the Wall Street Journal:
Snap may soon be the biggest company to go public on U.S. exchange since Alibaba hit the public markets in 2014.
What are your thoughts on this valuation?
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
Agreed. Snapchat seems to be what Twitter was a few years back. Don't think the craze over Snap will last so long.
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.
I agree with what you're saying, but to take it one step further: even if Twitter becomes uncool, it will still serve purpose. It is an easy way for journalists to get breaking news stories out quick. Snapchat has no professional use like that.
I remember when this board thought snapchat was stupid for turning down FB's offer. Instagram for $1 billion looks like an absolute steal now.
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.
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?
Snap caters to the young target groups, and as soon as Snap is no longer the coolest platform among the youngest, the group will find another app or platform. Facebook used to be cool, and every teenager and millennial used to spend a lot of time on Facebook daily, but I feel like its popularity is declining.
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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