Snapchat will soon be traded on the New York Stock Exchange, with its parent company Snap Inc. publishing the paperwork for its initial public offering on Thursday. The company is seeking to raise $3 billion by selling shares to investors. .
The IPO filing revealed all sorts of new information about Snap, giving the public detailed information about the financial health of the company for the first time, among other juicy details. Here are the 10 most essential details from the filing.
1. Snapchat’s daily user growth is flattening
As BuzzFeed News reported Wednesday, Instagram recently overtook Snapchat in the critical time-spent-per-user category. Snap’s filing contains even more concerning details for investors: daily active user growth is flattening, meaning the company may have hit a growth ceiling. “The growth in Daily Active Users was relatively flat in the latter part of the quarter ended September 30, 2016,” the filing said.
The flattening user growth Snap describes coincides with the rise of Instagram Stories, a near-direct clone of Snapchat’s Stories product.
2. Snap lost $514.6 million in 2016
Startups are often comfortable losing money in the pursuit of growth, and Snap is no different. The company generated $404.5 million in revenue in 2016, and reported $924.9 million in expenses. While its 2016 revenue was almost seven times greater than in 2015, Snap warned prospective shareholders that it “may never achieve or maintain profitability.”
3. Spectacles were not a big money maker
Spectacles “has not generated significant revenue for us,” Snap said in the filing. When Spectacles came out, some wondered whether the video-capturing sunglasses were a major new product for Snap or a brilliant marketing device. It seems like it might be the latter.
4. We still don’t know the valuation Snap is seeking
All the details Snap provided will help investors learn more about the company, but the key detail, the amount Snap believes it’s worth, is missing at this point — which isn’t surprising. Snap is expected to release this information in a revised prospectus in the coming weeks. If Snap aims too high, it could end up in a situation similar to Twitter, which has spent its post-IPO existence trying to live up its IPO valuation.
5. Evan Spiegel will own about a quarter of Snap.
The Snap CEO currently has a 22.4% stake, the prospectus shows. After the IPO, he’ll get a special bonus — a “CEO award” — of an additional 3% of the shares.
6. New shareholders will have no say in running the company
Snap’s founders, Spiegel and Robert Murphy, currently control a combined 88.6% of the company’s voting stock, according to the prospectus. The company is selling only one class of stock in its IPO, and these shares will have “no vote on matters submitted to our stockholders.”
“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,” the IPO document says. This set-up is similar to ones used at Google and Facebook that let the company’s founders control it with little-to-no input from other investors.
7. Snapchat will spend $2 billion on Google services in the next five years
The company has committed to $2 billion of spending on Google's cloud computing services in the next five years, and is very dependent on Google. Snap warned potential investors it has "built our software and computer systems to use computing, storage capabilities, bandwidth, and other services provided by Google, some of which do not have an alternative in the market."
8. Spiegel borrowed $15 million from Snap last year.
The Snap CEO borrowed the $15 million in February 2016, on top of $5 million he had previously borrowed from the company, according to the prospectus. He repaid the loans before the end of the year.
9. Snap paid $890,339 to protect Spiegel last year.
The bill for the CEO’s personal security was bigger than his $503,205 salary, but not as big as his $1 million bonus.
10. Snap has been very friendly to Evan Spiegel’s dad’s law firm.
Snap has paid hundreds of thousands of dollars for legal services from the Los Angeles corporate law firm Munger, Tolles & Olson, where Evan Spiegel’s dad John Spiegel is a partner. While the elder Spiegel hasn’t done any legal work for the company, it has paid almost $650,000 for legal work in the past three years.