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What's going on?
Snap Inc., the owner of popular social messaging app Snapchat, publicly filed its intention on Thursday to have its stock trade on the New York Stock Exchange (a.k.a. IPO). Its expected to be the biggest tech IPO in years! (tweet this)
What does this mean?
This news wasnt a surprise: Snap privately filed its intention to IPO last year, but Thursday was the first time that detailed financial information was released. Prospective investors learned that Snapchat has 160 million daily active users (compared to Instagrams 400 million) and the majority of them are aged 18-35.
Why should I care?
For the stock: Its about user growth, engagement and monetization.
Snapchat is often viewed as the younger generations version of Facebook and its high engagement among under 25s is touted as a big strength (although Facebook is fighting back by, essentially, copying some of Snapchats features). For Snapchat to be successful in the upcoming years, it will almost certainly have to maintain the loyalty of its young user base and find lots of new, highly engaged users from whom it can derive revenue.
The bigger picture: Voting rights are important to shareholders and Snaps new stock wont have em.
Snaps new shareholders will not be able to vote on things like the companys management composition and strategic direction. When things are going well, investors are typically happy to forgo their voting rights in order to gain exposure to a company (for example, Facebook recently created some non-voting stock, and not many investors seemed to mind). But if things go poorly, that lack of shareholder influence could be a big disadvantage to stockholders.
Originally posted as part of the Finimize daily email.
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