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Ahh Snapchat~ The app that all my young friends tell me to install.

I thought that Snapchat would disappear after other messengers adopted similar functions but I guess it is more than that.

Recently, Snap Inc filed its S-1 to start the IPO process.

Let’s dig in.

Pros

  1. Prestigious underwriters.
  2. 158 million users. High advertisement targeting!
  3. Explosive revenue, more than doubled in 2016!
  4. Good customer base. 18-35. They could be loyal customers with growing consumption power for a long time.
  5. Separation of CEO/ Chairman. Some corporate governance.

Cons

  1. We are not aware of any other company that has completed an initial public offering of non-voting stock on a U.S. stock exchange. We therefore cannot predict the impact our capital structure and the concentrated control by our founders may have on our stock price or our business.  (p.36) Non-voting Class A shares?! I know that Facebook and Google have super-shares but non-voting? I guess Snap really wants to keep control.
  2. Snap Inc. is a camera company.
    Camera company? Hmmm…GoPro is a camera company branding as a media company, and not doing well. Let’s see how a messaging company branding as a camera company does. No manufacturing facility. So if there is a manufacturer issue, no camera.
  3. $395.1 million of goodwill and intangible assets, net related to our acquisitions! You can’t simply get money for goodwill…also, this brings up the question about the quality of the acquisitions.
  4. Material weakness. Yeah, potential accounting issues are never good.
  5. Adjusted EBITDA and Free Cash Flow adjustments are negative! It may be some time before investors see profit.

In conclusion, despite some issues, given its explosive growth and all the underwriters on the deal, Snap may do well as an IPO. But as a longer term investment I am not sure. I will see how the IPO develops.

 

Interesting Finds

1.We rely on Google Cloud for the vast majority of our computing, storage, bandwidth, and other services. Any disruption of or interference with our use of the Google Cloud operation would negatively affect our operations and seriously harm our business.

We know that Amazon, Microsoft, and Google are making a killing with the Cloud. As we have more firms using the Cloud, looks like these stocks will do well 😀

2. People still spend more time on TV then mobile. I thought that people spent more time with their phones.

3.  Amount reported includes $890,339 for security for Mr. Spiegel. I guess people really do want to come after him.

4.Spiegel gets $1 dollar compensation after IPO but for now gets 500K!

5. Munger, Tolles & Olson LLP Services, where Spiegel’s father is a partner, provided legal service for Snap Inc.

6. Build-to-Suit Leases. I guess Snap is trying to get the gain of rising real estate?

7. A very long story portion. There is lot of story telling…

Time taken to go through the prospectus < 1 hr

 

 

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