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Snap Inc. Officially Files $3 Billion IPO, Says It May Never Achieve Or Maintain Profitability

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Snap Inc., parent company of popular photo-sharing app Snapchat, has officially filed public documents for its initial public offering Thursday, seen as the first major tech IPO this year, and the biggest U.S. tech IPO since Facebook's in 2012.

The IPO comes five years the launch of Snapchat, at a promising, if challenging inflection point for the company. It has recently redefined its identity, leaning toward being a "camera company" instead of simply an app developer. True to its intent, the company has produced and has already found success with Spectacles, a proprietary video-recording pair of sunglasses.

Snap Inc. Goes Public

Snap Inc.'s IPO seeks to raise $3 billion on the New York Stock Exchange under the ticker symbol SNAP. Snap said it had 161 million daily active users in the December quarter, according to CNBC.

According to USA Today, younger people, dubbed as the millennial generation, flock to the company's services more than other age groups. Snapchat users aged 25 and over used the app around 12 times a day for about 20 minutes. Those younger are more engrossed — they used the app 20 times for about 30 minutes on a daily basis. The report says that 2.5 billion photos are created and shared per day on the app.

Snapchat's Revenue Growth Highlights

Snapchat's revenue growth is staggering — but so are its losses.

The company's net revenue for 2016 amounted to $404.48 million, significantly larger than $58.66 million the year before.

Snap Inc. didn't shy away from less-than-stellar figures. Despite its growth, the company is losing money. Its total losses have amounted to $514.64 million, greater than the $372.89 million recorded a year earlier.

It's loss from operations amounted to $520.39 million in 2016, larger than the $381.73 million recorded in 2015.

Snap Inc. Warns Investors

The figures suggest that the service grew nearly seven times in a year, but the company's losses eclipsed its revenue.

"We have incurred operating losses in the past, expect to incur operating losses in the future, and may never achieve or maintain profitability," the company stated in the filing. Companies who have also filed their IPO, such as Twitter, have employed similar dialogue in the past. Like Snapchat, Twitter was also struggling to generate a profit when it went public, while Facebook was fending progressively.

Of course, the pessimistic forecast could only act as boilerplate legal language, although by the looks of it, Snap Inc. is still a tough sell. The IPO also comes at a time when Snapchat's core concept, ephemeral photos and videos, are being copied by Facebook and Facebook-owned Instagram, who are not exactly subtle in their efforts. Facebook has been relentlessly trying to best Snapchat. Recently, Instagram launched Stories, a near-clone of Snapchat Stories.

Unlike Almost Every Public Offering

Snap Inc. noted that it's unlike almost every public offering the market. The two cofounders will control "all stockholder decisions."

"We are not aware of any other company that has completed an initial public offering of non-voting stock on a U.S. stock exchange." Therefore, Snap Inc., can't predict how its capital structure alongside control by its founders will impact its stock price or business. This mirrors a lot of its Silicon Valley bedfellows, employing a dual-class stock structure that consolidates control among a few key executives.

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