Sunday, January 23, 2022

Snap Inc arrives in London to woo sceptical investors ahead of IPO

Snap Inc, owner of popular messaging app Snapchat, kicked off its first investor roadshow looking to persuade London money managers to back its initial public offering.

By: Reuters |
February 21, 2017 11:00:03 am
Snap Inc, Snapchat,  New York Stock Exchange, Snap, Snapchat spectacles, Investor roadshow, CEO Evan Spiegel, Apple, hardware, camera, wearable gadgets, monetisation problems, Snapchat  growth prospects, Snapchat valuation, Snapchat corporate governance, Tech companies, Facebook, Technology, Technology news Investors who attended the event said Snap’s 26-year-old Chief Executive Evan Spiegel gave a sleek presentation.( Image for representation, Source: Reuters)

Snap Inc, owner of popular messaging app Snapchat, kicked off its first investor roadshow on Monday, looking to persuade London money managers to back its initial public offering in the face of concerns about its growth prospects, valuation and corporate governance.

The US company, which has yet to make a profit, is targeting a valuation of between $19.5 billion and $22.3 billion from listing on the New York Stock Exchange, after cutting its initial target of $20 billion-$25 billion last week following investor feedback.

Watch all our videos from Express Technology

Investors attending Monday’s event said Snap’s 26-year-old Chief Executive Evan Spiegel gave a sleek presentation. However, they were disappointed there were no projections on the company’s future revenues or advertising share – an indication of how quickly Snap thinks it can make money from its huge user base.

“That’s the million dollar question and we won’t find out for some time,” said one potential backer on his way out from the hour-long event where Spiegel ditched his usual casual wear and wore a suit with no tie.

Some were disappointed that it was just a question-and-answer session with no demonstration of Snapchat’s spectacles, launched in the United States late last year, which come with a built-in camera. One attendee, however, said it made sense not to push the hardware angle too much at this stage.

Few US firms aside from Apple have made big profits on hardware, and camera and wearable gadget makers have much lower valuations than Snap is seeking. Most of the questions related to how the company plans to manage its engagement with advertisers and users, and monetise that better, according to people who were in the room. Its responses won over some potential investors.

Snap Inc, Snapchat,  New York Stock Exchange, Snap, Snapchat spectacles, Investor roadshow, CEO Evan Spiegel, Apple, hardware, camera, wearable gadgets, monetisation problems, Snapchat  growth prospects, Snapchat valuation, Snapchat corporate governance, Tech companies, Facebook, Technology, Technology news Los Angeles-based Snap also plans roadshows in New York, Boston and San Francisco. It expects to price its IPO after the US market closes on March 1. ( Image for representation, Source: Reuters)

“Management did a good show, they were very convincing,” said one attendee. Los Angeles-based Snap also plans roadshows in New York, Boston and San Francisco. It expects to price its IPO after the US market closes on March 1, according to a confidential document seen by Reuters.

GOVERNANCE CONCERNS

Some fund managers have said they will stay away from Snap given its decision to adopt a three class share structure – the first of its kind – that will mean shareholders who buy in through the IPO will not have any voting rights. Instead Spiegel and his co-founder Bobby Murphy will have the right to 10 votes for every share, and existing investors one vote for each of their shares.

“My view would be investors should tread with caution here, the fact the shares will carry no voting rights would be a major concern for me from a governance perspective,” Richard Saldanha, global equities fund manager at Aviva Investors, said ahead of the roadshow. Aviva manages 318 billion pounds across a range of asset classes.

Mike Fox, head of sustainable investments at Royal London Asset Management, said the inability to vote against a company at its annual general meeting was a “major red flag” and he would not be taking part in the IPO. “It is worth noting that while many U.S. tech firms have delivered tremendous returns for investors following their listing, performance of firms in this sector has not always matched investor expectations following an IPO,” he said, also before the meeting. Others were less worried, though.

Also Read: WhatsApp status feature brings in Snapchat-like video, photo updates; here is how it works

“Snapchat offers a cocktail of hype, insane valuations, dubious fundamentals and weak governance. However, the same was said about companies like Google and Facebook when they listed,” said Geir Lode, head of global equities at Hermes Investment Management. “For tech companies early in their lifecycle the weak governance structure is fairly typical, and even with those concerns subsequent shareholder returns have often been stellar.”

With tech-savvy millennial users of Snap’s products able and willing to quickly jump ship to the next Big Thing, there were also concerns about its competitive position versus industry rivals such as Facebook. “Barriers for entry would appear low here as well, and you could see their demographic – 18-34 year olds – easily shift to another service,” Aviva Investors’ Saldanha said.

Get the best of Tech news all week
delivered to you

📣 The Indian Express is now on Telegram. Click here to join our channel (@indianexpress) and stay updated with the latest headlines

For all the latest Technology News, download Indian Express App.

  • Newsguard
  • The Indian Express website has been rated GREEN for its credibility and trustworthiness by Newsguard, a global service that rates news sources for their journalistic standards.
  • Newsguard
Advertisement
Advertisement
Advertisement
X