Snapchat shows the way for peers with market float

SNAPCHAT will lead its generation of technology companies into the public market after firing the starter’s gun on a US initial public offering that it hopes will put a value on the messaging start-up of between $20-billion and $25-billion (about R283-billion and R354-billion).

A successful float, which could come as early as the first quarter of next year, would help to pave the way for even larger technology companies, from Uber to Airbnb, to brave the public markets.

Snapchat will be one of the biggest technology IPOs in recent years, as tech start-ups have been shy about going public, preferring to soak up private funding from venture capital and Wall Street fund managers.

Uber, the ride-sharing app, was last valued on the private markets at $68-billion, while Airbnb, the accommodation marketplace, has a $30-billion valuation.

Snapchat has appointed Morgan Stanley and Goldman Sachs to lead the IPO, according to people briefed on the plans.

After a quiet first half with no major technology IPOs, cloud communications company Twilio was the first unicorn — a tech start-up valued at more than $1-billion — to go public with its June debut. But there have yet to be any listings from a new generation of start-ups valued at more than $10-billion.

The Los Angeles-based company, founded four years ago by CEO Evan Spiegel, now 26, and Bobby Murphy and Reggie Brown, is now on a push to expand internationally.

Snapchat has 50 million daily users in Europe, a third of its 150 million daily users worldwide. Disclosure of the user numbers, by Snapchat UK head Claire Valoti, gives investors a glimpse of the potential advertising market the app can tap into and comes less than a year after the company started its international expansion with the opening of a London office last December.

In April, Snap, as the company was recently renamed, opened an office in Sydney, followed by a new one in Paris this month. It has a sales force of hundreds worldwide.

In the US, more than half of new users are over the age of 25. Snapchat’s biggest US demographic is 18-24, followed by the 25-34 age bracket.

At the same time, Snapchat is evolving its advertising business. The company, which last raised funds at a valuation of at least $15-billion, has been working with advertisers to create special photo filters and lenses for users. — © The Financial Times Limited 2016