Snap Inc. set to pitch US$3.2B share sale to voteless investors

Snap Inc. is pitching a stock to investors that’s more expensive and comes with less shareholder control than any social media company before it.

The result? The company has had to temper its expectations for how it thinks public markets will value the company after its initial public offering.

Snap, which set the terms for its IPO Thursday, will offer 200 million shares for US$14 to US$16 apiece, according to a filing. That would give the disappearing-photo application maker a market value of US$16.2 billion to US$18.5 billion, based on the total shares outstanding after the offering.

It’s quite a haircut from earlier plans. In November, the company was eyeing a market value of US$20 billion to US$25 billion, a person familiar with the matter said at the time. A month earlier, that range was closer to US$25 billion to US$35 billion, people familiar with the matter said, with one suggesting it could be as much as US$40 billion.

Still, the high end of the range is more richly valued than its peers when they went public. Snap’s asking investors to buy into a stock that’s valued at 19.7 times forward 12-months advertising sales, just over the 19.4 times that Facebook had at the time of its IPO. Twitter Inc. was valued at 13 times, according to data from Bloomberg Intelligence.

For investors choosing which social media companies to invest in now, the difference is more stark. Facebook currently trades at about 10.2 times forward 12-month sales, while Twitter is half that.

Snap is aiming to sell 145 million shares, with the proceeds going toward operating expenses, capital expenditures and potential acquisitions. The remainder of the shares offered come from selling stockholders, including Benchmark and Lightspeed Venture Partners.

Snap co-founders Spiegel and Murphy each plan to sell 16 million Class A shares, which could bring in as much as US$256 million apiece. After the offering, each will maintain a 44 per cent control over the votes.