One of the biggest news in the tech industry these days was the upcoming Snapchat IPO. According to Snapchat, they are looking to raise by as much as $3.2 billion in the upcoming IPO. The company plans to sell 200 million shares at a price between $14 and $16 each. However, that's not all to it. Snapchat's recent IPO filing states that at least 50 million of the shares will be subjected to a lock-up period.
Snapchat's upcoming IPO is the biggest offering within the tech industry since AliBaba's IPO sale last 2014. Snapchat is allocating large blocks of shares to corporate investors and mutual funds, a strategy that will increase the chances of a stock sale's success.
On the other hand, corporate investors and mutual funds love to get in early so they can maximize the results if the company becomes a winner. However, with large volumes of money, these big investors have the tendency to be slow when it comes to moving funds. In a fast-paced world of modern trading, being slow is a curse.
To counteract this problem, huge investors negotiate with the company doing the IPO for a guaranteed seat. This is exactly what's happening with Snapchat's upcoming IPO. In exchange for the guaranteed seats, Snapchat is not allowing the big investors to dump the stocks within a year. Although, Snapchat's filing did mention that they still have the right to waive the lock-up period requirement.
According to a report by the Business Insider, Snapchat's IPO is already oversubscribed by $6.8 million. The stock world is expecting that Snapchat will set the prices on March 1 and by Mach 2, trading of the stock can begin. Before Wednesday, Snapchat still has the option of either increasing the volume of shares they plan to sell or raise the price of the stocks. Snapchat's IPO is really attractive for big time investors for many reasons.
Investors that are getting in early with Snapchat's shares are betting on the idea that advertising will migrate to the mobile web. This isn't such a perilous position, especially when you consider IDC's (a research firm) recent report. According to the company's research, mobile ads will triple by 2020, reaching $196 billion. Snapchat just recently began to sell their ad space, and the recent revenue reports are just the tip of the iceberg.
Another good reason why Snapchat's shares are attractive is that the company is expected to scale easily. Snapchat continues to develop features that keep the users "tuned-in." Furthermore, the cost of such developments is low compared to its fast-rising revenue.
While Snapchat's slowing user growth rate is a real concern, it's not a real threat for big time investors to move away from the IPO. The upside potential easily offsets the downsides. It's no wonder that Snapchat's IPO is so hot right now. In fact, it's so hot that Snapchat is still oversubscribed despite placing a holding period for the 50 million out of the 200 million shares they are planning to sell.