IG said the current price in the market estimates the value of Snap to be US$27.4bn, which would make it the biggest US tech float since Facebook Inc’s (NASDAQ:FB) US$105bn launch in May 2012, and the biggest overall offering since Chinese e-commerce giant Alibaba Group Holding Ltd. (NYSE:BABA) floated in the US in 2014 with a vauation of US$230bn.
Snap, the owner of trendy social media site Snapchat confirmed plans last week for a US$3bn share sale, although investors in the firm will have no voting rights in the firm.
It would become the first US company to go public with no shares on offer granting voting rights to stock market investors. Its founders, Evan Spiegel and Robert Murphy, will keep control of the company.
Excitement but concerns …
Chris Beauchamp, IG’s chief market analyst, said: “Historically IG’s grey markets have been solid indicators of where companies official launch prices will end up.
“Snap is one of the biggest and most anticipated US tech IPOs for years, with the potential to rival the excitement witnessed when Facebook and Twitter went public.”
He added: “The echoes of Twitter’s IPO are clear to see, given Snap’s admission that turning a profit could be difficult.
“Whether the IPO hype survives once the initial celebrations are over remains to be seen.”
Tougher competition ..
Facebook's Instagram, which recently introduced disappearing video content similar to Snapchat, had 600mln users as of late last year.
Snap’s IPO document showed the number of its daily active users grew to an average of 158mln at the end of December, up 48% year-on-year.
The firm, which launched itself in 2012 with an app that sends disappearing messages, rebranded itself last year as a camera company and started selling US$130 video camera glasses.
Beauchamp said: “In terms of valuation, concerns centre on the company’s widening losses and when, or if at all, it will become profitable. There are also fears about Snap’s shifting business model.”
He added: “Snap is already facing tougher competition than it did just a year ago, as Facebook and its Instagram platform copy many features that Snapchat pioneered.”
But M&A could underpin …
But the IG analyst pointed out that once Snap’s shares, start trading, they could have another supportive factor.
Beauchamp noted: “Facebook covets Snapchat. It last tried to buy Snapchat for US$3bn back in November 2013, and it has copied some of Snapchat’s features to its own services.
“It could be that Facebook, and possibly Google, may yet decide to try and buy Snap. That will underpin the share price.”