Snapchat Faces Investor Grilling at IPO Roadshow

  • Wednesday, February 22nd, 2017
  • Author: Tim Maytom
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Snap executives faced a grilling from investors at the firm’s IPO roadshow in New York in Tuesday. A report in Business Insider sourced from investors present at the event – journalists were not allowed in – reveals investor concerns on a number of fronts.

A prime concern is the way that Facebook is replicating many of Snap’s USPs, such as story feature on Facebook-owned Instagram which enables users to post images or videos that stay visible for 24 hours, just as Snapchat’s feature of the same name does.

Another concern is the recent sudden slowdown in user growth. Between July and September, Snapchat added just 6m new daily active users, compared to 18m between April and June. Snap has blamed the slowdown in problems with the Android version of its app.

In its S-1 filing, it said: “In mid-2016, we launched several products and released multiple updates, which resulted in a number of technical issues that diminished the performance of our application. We believe these performance issues resulted in a reduction in growth of Daily Active Users in the latter part of the quarter ended September 30, 2016.”

Snap also acknowledged in the filing that its business “could be seriously harmed” if Android continues to rise in popularity and it fails to improve the operability of its app on Android devices. Snap says it hopes to iron out the problems by developing for iOS and Android simultaneously. That won’t make the Instagram problem, which some investors believe is the real one, go away, however.

Revenues were another bone of contention. Snap’s revenues grew from $58.7m (£47.2m) in 2015 to $404.5m last year, and Goldman Sachs has forecast that the company’s revenues will approach $2bn kin 2018, but investors at the roadshow were still sceptical about where future growth might come from, and Snap did not tackle these concerns at the New York get-together It’s worth noting too that Snapchat’s average revenue per user is less than 15 per cent that of Facebook’s.

Snap is pitching itself to investors as a “camera company”, which is interesting given that is has only one hardware offering, its Spectacles camera glasses that are available in the US. It is aiming to raise up to $3.2bn from the IPO, valuing itself at up to $22bn. It reduced its initial valuation target of $20-25bn last week following negative feedback from investors. After yesterday, it should be in doubt that those Wall Street types are a darn site harder to please than the millennials who can’t get enough of its app.