Dive Brief:
- An attempt to chat up approximately 70 fund managers and analysts in London in advance of parent Snap Inc.’s initial public stock offering may not have gone well, according to a report in Bloomberg, citing fund managers present at Monday’s private meeting.
- Investors peppered Snap executives with questions about several issues seen as potentially troublesome, including declining user growth, competition from Facebook and the ownership structure once the company is public, per the report.
- Despite the questions, at least one fund manager told Bloomberg the trip to London — something neither Facebook nor Twitter did prior to their IPOs — was appreciated. The roadshow returned to New York yesterday with a presentation deemed typically "unremarkable" in a report from TechCrunch.
Dive Insight:
News of how Snapchat’s attempts to garner interest from investors during its roadshow prior to its planned IPO — which could come as early as next week — is important for the marketing industry for several reasons.
In its filings with the Securities and Exchange Commission, Snap Inc. indicated that the upper end of its valuation could be $22.2 billion, which would line its pockets with $3.7 billion in money to invest in continued innovation and platform development. However, if investors are cool on Snapchat’s potential, shares could sell for less, causing the company to pull back on some of its growth plans, making it harder for Snapchat to compete against Facebook. Facebook is pushing to retain its leadership role, in part, by borrowing ideas from Snapchat for its main platform as well as for its Instagram, Messenger and WhatsApp apps.
If the IPO were to bring in significantly less than Snap's predicted valuation of $14 to $16 per share, a public relations disaster could unfold for an app that has been a darling of the media and marketers, who might start taking a harder look at the platform.
More broadly, the ad tech market is hoping for a home run from Snap Inc.’s IPO, as this success could open the coffers for others hoping to go public following a few years of soft interest from public funding.
Some potential investors may have been left with a bad taste in their mouth following Twitter’s IPO in 2013 as the company’s stock value is down significantly from two years ago. Snapchat appears to face some of the same challenges that Twitter has, namely questions around just how broad the appeal of the platform is. In Q4, Snapchat’s average daily user growth fell below 50% for the first time since at least 2014. In answer to investors’ concerns about growth, Snap executives pointed to issues with development on Android, per Bloomberg.
Investors in London — echoing sentiments that are more widely held — are also concerned that Snap is listing non-voting shares, something that hasn’t been done in the U.S., according to Bloomberg. This means stockholders will have little if any influence over how the company is run, but Snap assured investors they will listen to shareholders even if they don’t have a vote.
