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Case study snap
- 1. IT’S A SNAPINITIAL PUBLICOFFERING By: Chase Bradley
- 2. OVERVIEW ▸Look over Snapchat’sIPO Campaign ▸What Snap had to do to get to IPO ▸Evaluation ▸Conclusion
- 3. HISTORY OF SNAP ▸Snapchatis an image and video messaging application created in 2011 by Evan Spiegel, Bobby Murphy, and Reggie Brown ▸Created at Stanford for their product design class ▸Initially called Picaboo
- 4. WHAT IS ANIPO ▸The grand launching of a private company that has decided to go “public” ▸Company’s status moves from privately held, to individuals or families, to publicly held by stockholders ▸Companies go public when it has grown to a point where it needs more money to keep their competitive edge
- 5. PROS AND CONSAN IPO PROS CONS ‣ Raises Money Fast ‣ Requires Disclosure ‣ Increases Financial Discipline ‣ Increases Scrutiny ‣Offers Unique Marketing Opportunity ‣ Activist Shareholders ‣ Provides Stock Option Plans
- 6. WHAT INFO FINANCIALANALYSTS AND INVESTORS SEEK ‣ REVENUE AT SCALE—can the company get bigger and still maintain growth ‣ CASH ON HAND—is the company already successful and financial disciplined ‣ PROVABILITY—does it have the ability to become profitably ‣ MARKET SIZE—how many customers are there for product or service ‣ COMPETITION—see how they stack up against competitors ‣ PRODUCTS— ‣ LEADERSHIP—CEO must be able to assure potential shareholders ‣ SALES AND MARKETING—must show their expertise with sales and marketing leadership ‣ OTHER BUSINESS FUNDAMENTALS—strong IPOs are companies with sound fundamentals and professional direction
- 7. STEPS FOR SNAPIPO ▸STEP 1: PICK THE BANK UNDERWRITERS ▸STEP 2: PROVIDE SNAP’S CASE—SEC FORM S- 1(PROSPECTUS) ▸STEP 3: CONDUCT A ROAD SHOW ▸STEP 4: TIME TO CONSIDER— A QUIET PERIOD ▸STEP 5: PRICE THE STOCK AND SET A DATE ▸STEP 6: OFFER THE STOCK
- 8. STEP 1: PICKTHE BANK UNDERWRITERS ▸Not absolutely necessary ▸Most companies work with banks to underwrite their IPO’s shares ▸Snap’s biggest bank underwrites were Morgan Stanley and Goldman Sachs Group Inc. ▸Benefit of buying shares at the IPO price before they’re listed
- 9. STEP 2 PROVIDESNAP’S CASE- SEC FORM S-1 (PROSECTUS) ▸Requires frequent and detailed information about it’s business model ▸Snap’s 178-page document, was dated Feb. 2, 2017, was conducted with lead investment bankers ▸Key details included, revenues increase, daily active users, user engagement, user growth, profit/losses, voting rights, and competitors
- 10. SNAPS STRATEGY ANDOPPORTUNITY ▸Product Innovation- take risks to improve their camera, to drive user engagement ▸Largely dependent on its mobile infrastructure and its advertising market ▸Most of Snap’s users are in developed countries, tending to have cheaper bandwidth costs, so overall less expensive to serve these communities
- 12. CONT. ▸Size of advertisingmarket ▸Global advertising is 70% on mobile devices and nearly 85% of mobile advertising is in the top 10 advertising markets ▸Over 60% of Snap’s daily users comes from this list
- 13. EXAMPLES OF SNAPADVERTISING ▸According to New York Times, a lens sponsorship can cost up to the $450,000-$750,000 depending on the day ▸Snap created nine X-Men universe lenses that were played more then 251 million times, resulting in 56 years of play in a single day.
- 15. STEP 3 CONDUCTA ROAD SHOW ▸ Once the SEC papers are filed Snap went on a road show to seven cities in under two weeks ending in NYC ▸35 min video, talked about business model, user metrics, and ended with safeguarding privacy and providing an innovative work environment ▸Talked about Spectacles product ▸For private investors not media
- 17. STEP 4 TIMETO CONSIDER—A QUIET PERIOD ▸Once a company files for SEC(prospectus), federal regulations require a “quiet period” ▸Reviewing is taking place, Snap cannot provide any new information ▸Once the final version is approved with a price range, an “effective date” is set for the IPO ▸Keep everything consistent with past practice
- 18. STEP 5 PRICETHE STOCK AND SET A DATE ▸On March 2, 2017, Snap released a news release the day before the public offering ▸Let the investors know its stock would sell 200 million shares, for $17 per share, for a total offering of $3.4 billion ▸Sale represented about 1/5 of the company’s value
- 19. STEP 6 OFFERTHE STOCK ▸Despite the company’s $515 million loss the pervious year, it’s IPO was highly anticipated ▸When the stock opened it sold at $24 a share and a high of $26.05 ▸44 percent jump valuing the company at $28 billion ▸CEO was there with supermodel fiancé, posting pics on Snap at NYSE with giant yellow banners, festive atmosphere
- 20. SNAPS SUCCESS ▸Snap’s IPOwas a success ▸44% jump on first day of trading ▸Investors noted company’s innovation and young leadership ▸Not everyone was buying, but Snap proved it was a major player with a valuation of $33 billion
- 21. INVESTOR RELATIONS: SNAP’SPUBLICS ▸Most important relationship are with research analysts, and financial/business journalists, not investors ▸The mere mention of a company by a popular analyst can temporarily cause its stock to rise or fall-even if nothing in the company has changed ▸IR staff help coordinate press conferences, shareholders meetings, etc.
- 22. BUMPY ROAD AHEAD ▸July11, 2017, Morgan Stanley(Snaps lead IPO investment bank), downgraded the stock based on it’s own financial analysis ($16.15) ▸Nov. 29, 2017 Snap had a redesign, that made Kylie Jenner tweet bad things, that dropped their stock 7% ▸Feb. 7, 2018 Snap announced it’s first motive earning, and stock rose 40 percent ▸March 10, 2018 “would you rather! Slap Rihanna—Punch Chris Brown”, stock fell 7 percent
- 23. FIRST QUARTER WOES ▸Aftersuccessfully IPO, the company’s failure to meet revenue (150M vs.158M) and daily active user growth(166M vs. 167.3M) this sent investors into a sell mode ▸Stock dropped 20% after the earnings report released ▸Snap released a statement saying users spend an average of 30 min a day, so advertisers should invest