Snap is looking to earn up to $3.2 billion through an IPO, selling 200 million class A shares at between $14 and $16 dollars each, its official filing with the US Securities and Exchange Commission (SEC) shows.
Some 145 million shares are being sold by Snap itself and the rest by existing stockholders, which means Snap’s net proceeds will be around $2.1 billion.
Earlier, the Snapchat maker had valued itself at between $19.5 billion and $22.2, The Wall Street Journal (WSJ) reported. According to the IPO filing, it is now seeking a market value in the range of $16.2 billion to $18.5 billion.
The firm was originally aiming for a valuation of $20 billion to $25 billion.
Even with the lower figure, it would be the largest US-listed tech IPO since Alibaba in 2014.
Snap will market the offering to mutual funds and hedge funds next week in cities including London and New York.
The shares could be priced as early as 1 March and begin trading the following day on the New York Stock Exchange, WSJ reported.
Some investors have questioned if the Snapchat maker is worth the valuation it wants. In an IPO filing earlier this month the firm revealed it is seeking to raise as much as $4 billion. The company recently revealed its net loss increased to $514.6 million in 2016 from $372.9 million the year before, though revenue for 2016 was $404 million, up from $58.7 million.
The filing also pointed out that Snap faces significant competition in “almost every aspect of our business”
Its daily average use base, currently 158 million, is also growing slowly. What’s more, investors will not get voting rights, with founders Evan Spiegel and Robert Murphy retaining control.
Goodwater Capital, a two year-old venture firm, published a detailed report about the company, where it noted Snap’s daily active user (DAU) growth declined significantly in the last two quarters with only 3.3 per cent quarter-on-quarter growth in Q4 2016.
The user data for Facebook (483 million DAU, 5.7 per cent quarter-on-quarter growth) and Twitter (100 million DAUs, 6.9 per cent quarter-on-quarter growth) were stronger at their IPOs than Snapchat.
Snap raised $2.7 billion from prominent US and global investors, but now only has $987 million in cash, the report said, adding the company had a negative free cash flow of $678 million in 2016 and has more than $3.5 billion-worth of contractual commitments.
Snapchat the social media of choice for millennials
People aged 18 to 24 years old make up 35 per cent of Snapchat users in the UK, but account for 70 per cent of time spent in the app in the country, according to Verto Analytics.
In comparison, the age group accounts for just 8 per cent of time spent on Facebook, 16 per cent on Twitter and 43 per cent on Instagram.
Nearly 40 per cent of Snapchat’s audience is over 35 years old, but they account for just 5 per cent of the time.
Snapchat is highly “sticky”, but engagement is falling: the average Snapchat user spends 4 hours 22 minutes on it a month, down from five and a half hours six months ago.
However, this is still much higher than Twitter (56 minutes) and Instagram (41 minutes) but much lower than Facebook (12 hours 43 minutes).
“There are questions about the sustainability of Snapchat’s app, particularly whether it will continue to be championed by younger people in the future on whom it is so reliant, as the huge share of time figures for the UK illustrate,” says Dr Hannu Verkasalo, CEO of research firm Verto Analytics.
“Facebook and Google have grown into multi-brand publishers, betting on many avenues, and their fortunes are built on top of a strong, long-term audience whilst Snapchat’s active user base has been so for just one to two years,” he added.
Goodwater also conducted a survey in January in the US and found Snapchat holds a 16 per cent share of “favorite social apps” among leading social apps for younger users (under 30 years old), but only a 3 per cent share among older users.
It also pointed out the younger demographic may be less brand loyal and more likely to follow trends.