Snap Inc., the parent of disappearing message app Snapchat, will price its shares at $17 each when it begins trading on the New York Stock Exchange on Thursday, valuing the company at $24 billion, the company announced Wednesday. The company plans to sell 200 million shares, which will trade under ticker symbol SNAP, for a total offering size of $3.4 billion.
That price exceeds Snap’s initial plan to price its stock between $14 and $16 a share, showing strong interest in the biggest tech IPO since China’s Alibaba went public in 2014.
Snap had 158 million daily active users by the end of last year, but the company’s user growth rate is slowing — and its losses are widening. In 2016, Snap reported a $514.6 million net loss on revenue of $404.5 million, after losing $372.9 million on $58.7 million in revenue the previous year.
The company is also selling shares without voting rights, as founders Evan Spiegel and Bobby Murphy will retain an ironclad grip on Snap.
However, given Snap’s hype, scale and engagement in a demographic that’s hard for advertisers to reach on linear television — users under 25 visited the app more than 20 times a day on average, spending a total 30 minutes, according to Snap’s S-1 filing — there was always going to be plenty of demand. Especially for those investors who missed out on Facebook, which went public in May 2012 at $38 a share and currently trades for more than $137.
In its S-1, Snap positioned itself as the logical alternative destination for ad dollars previously pumped into television, pointing out that mobile advertising is expected to nearly triple from $66 billion in 2016 to $196 billion in 2020 — and connecting it to a decline in TV viewership, which is especially acute among Snapchat’s core demographic.
“The shift in attention to mobile is more pronounced among younger audiences,” Snap said in the document. “According to Nielsen, people between the ages of 18 and 24 spent 35 percent less time watching traditional (live and time-shifted) television in an average month during the second quarter of 2016 compared to the second quarter of 2010.”
With 36 percent of Snap’s highly engaged users in that 18 to 24 range, and another 22 percent between 13 and 17, the company has a solid grip on a valuable and elusive demographic for marketers. Snap makes almost all of its money on advertising, so its viability as a business relies on it providing an attractive destination for those dollars. Based on its IPO demand, Wall Street seems fairly convinced.