Snap seeks IPO valuation up to $22.2 bn

Snap Inc, owner of the popular messaging app Snapchat, has set a valuation of between $19.50 billion and $22.2 billion in its initial public offering, significantly below expectations.

The company, which filed for an IPO earlier this month, was widely expected to be valued at between $20 billion and $25 billion, giving it the richest valuation in a US technology IPO since Facebook Inc.

“I think that the lower proposed valuation reflects feedback from institutional investors that the higher valuation is hard to justify,” Jay Ritter, IPO expert and professor at the University of Florida, told Reuters. “The concerns are about Snap, not the IPO market.” Investors have raised concerns about competition from Facebook, widening losses and the firm control of its founders even the company readies for the most anticipated IPO of the year. Snap said in a filing on Thursday that it expects to raise as much as $3.2 billion from the offering of 200 million Class A share. The offering is expected to be priced between $14 and $16 per share. Selling shareholders will sell 55 million shares and the remaining will be sold by the company.

Snap will have about 1.16 billion shares outstanding after the offering and list on the New York Stock Exchange under the symbol SNAP. Snap said it expects to use proceeds of about $2.1 billion for general corporate purposes and to acquire businesses, among other things.

Snap’s co-founder Evan Spiegel has a $588 million payday staked on his company successfully pulling off an initial public offering.

Snap, which launched in 2012 with an app that sends disappearing messages, rebranded itself last year as a camera company and started selling $130 video camera glasses.

Revenue rose nearly seven-fold to $404.48 million for year ended Dec. 31. However, net loss widened to $514.64 million from $372.89 million a year earlier, hurt by higher costs.

Snap’s co-founders Evan Spiegel and Bobby Murphy will hold 14.5 percent of Class A shares each, after the offering, down from 21.8 percent.

The company generates the majority of its revenue from advertising, seeking to challenge the dominance of existing internet giants.

Facebook’s Instagram, which recently introduced disappearing video content, had 600 million users as of late last year. Like Snapchat, Instagram sells advertising on its platform.

Morgan Stanley & Co LLC, Goldman Sachs & Co, JP Morgan Securities LLC, Deutsche Bank Securities Inc, Barclays Capital Inc and Credit Suisse Securities (USA) LLC are among the underwriters to the IPO.