The largest IPO since Alibaba launched in 2014, Snap Inc. is scheduled to be released this Thursday. Snap, the parent company of popular social media platform, Snapchat, is seeking multi billion dollar funding. It has been reported that the tech giant is planning to begin trading at roughly $14 – $16 per share. At this price, Snapchat’s market value would be around $20 billion, almost double Twitter’s market cap.
Many analyst’s are arguing that this estimate is considerably overvalued, as Snapchat is yet to make any positive revenue. Concerns have been growing over the social media’s company to become profitable, although investors are hoping that Snap will be able to turn the bend and rake in cash through ad revenue. If Snap is able to bring in real profits, the company has a serious opportunity to become comparable to Facebook, who have a total market value of close to $400 billion.
Snapchat’s main concern beyond ad revenue, is user growth. Generally known as a platform for millennials, the company has had difficulty reaching older audiences. If the company is able to attract older smartphone users, the potential for this company is incredible.
Over the last few years, investors have seen the good and the bad side of the social media market. Facebook has taken off since launching it’s IPO, with the social media platforms continuously generate substantial cash flows from ad revenues. On the other side, Twitter has lost significant value since going public, as its inability to grow users and revenue have led to falling stock prices.
Only time can tell whether Snapchat can learn from Facebook’s successes and Twitter’s blunders.