Snap, the parent company of social messaging app Snapchat, may think its worth more than $20 billion, but not all experts agree with that figure.
Snap is worth only $1.7 billion, according to David Haigh, CEO of valuation and strategy consultancy firm Brand Finance. That is a far cry from the $19.5-$22 billion range the company is seeking with its impending initial public offering. If Brand Finance is correct, that makes Snap worth only eight to nine percent of the suggested valuation.
Snap’s “brand value is relatively low because of low revenues and margins and an unproven ability to monetize the platform substantively,” Haigh said. “Snapchat has made its name by delivering posts which are here one minute and gone the next. Its users appreciate its ability to make their photos disappear, but over-excited investors certainly won’t feel the same about their cash.”
Haigh pointed out Snap even failed to make it on Brand Finance’s annual list of the 100 most valuable tech brands, despite the fact the firm’s IPO is expected to be the largest company to go public on a U.S. Exchange since 2014.
Snap in a recent filing with the Securities and Exchange Commission, set its price per share at $14 to $16. If Snap received an initial public offering price of $16 per share, Snap would be valued at $22.24 billion. At $15 per share, the mid-point of the expected range, valuation would come in at just shy of $20.9 billion.
Snap executives are now faced with the hardest part of taking a company public: pitching its stock to potential investors.
And that may not be easy. Haigh is not the only expert to say Snap is over-reaching. ETX Capital market strategist Neil Wilson told Forbes that by a “traditional yardstick” Snap is “overpriced.”
Investor and Seeking Alpha contributor Nicholas Durante, was even more adamant, saying in an article today that Snap is “not worthy of investors’ money.”
“The young company is overvalued with significant risk and huge losses in its future,” he said, adding the valuation is “pure growth play, which means eyes are going to be looking across their topline. Most investors aren’t expecting profitability from Snap anytime soon, but rather the opposite; huge losses. To justify the insane valuation, Snap must grow revenues substantially.”
Snap is expected to list with the New York Stock Exchange with a goal of going public in March.
Jennifer Cowan is the Managing Editor for SiteProNews.