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Facebook in Focus as Snapchat Plans $25 Billion IPO for March

Friday, October 7, 2016 8:09
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Facebook logoIn a move that could signal the first real threat to Facebook Inc’s (NASDAQ:FB) social media dominance, Snapchat parent company Snap Inc. is reportedly planning a massive $25 billion IPO for next year.

From the Wall Street Journal:

The company, formerly known as Snapchat, is preparing the paperwork for an IPO with a view toward selling the shares as early as late March, according to several people familiar with the matter.

There is no guarantee the four-year-old Venice, Calif., company will proceed with a share sale in that time frame, and there is no guarantee it will achieve a valuation of $25 billion or more.

But if the IPO does go through, and its valuation is in that $25 billion range, Snap would mark the largest U.S. IPO since 2014, when Alibaba Group Holding Ltd. (NYSE:BABA) debuted with a massive $168 billion public offering.

Snapchat is the social media platform of choice for the 18 to 24-year-old demographic, and boasts about 150 million daily active users. What started primarily as a way to send disappearing messages to fellow users — which many formerly used to send illicit photos and text — has rapidly evolved into a cutting-edge messaging service with hundreds of popular photo and video filters.

Older users are beginning to use the service as well, in a development that mirrors Facebook’s own success story. Originally, Facebook was only available to college students on a limited basis, but spread rapidly as it was offered to more colleges, and eventually, to the general public.

With Twitter (NYSE:TWTR) struggling to attract new users, Snapchat likely represents the largest current threat to Facebook. The company’s growth continues to impress investors, and a high-profile IPO next year would raise the company’s profile considerably.

Snapchat competes to attract the exact same advertisers that Facebook does, so the social media landscape will likely continue to heat up over the next several months as the proposed IPO nears.


Thus far, the markets don’t seem too concerned about Snapchat’s potential effects on Facebook. FB shares rose $0.13 (+0.10%) to $128.87 in Friday morning trading, and have surged 23.29% year-to-date.

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