It’s here, finally! One of the top venture capital unicorns has finally and publicly filed for an initial public offering. Snap Inc. has filed with the Securities and Exchange Commission to list under the “SNAP” ticker on the New York Stock Exchange for an IPO of up to $3 billion.

While Snapchat’s parent company is one of the 18 biggest IPOs to watch for in 2017, investors may want to consider that the company will have three classes of common stock. This is A, B, and C shares — and those who buy shares in the IPO will have no voting rights in the company.

Snap has also secured a rather large underwriting syndicate. It hired Morgan Stanley, Goldman Sachs, J.P. Morgan, Deutsche Bank, Barclays, Credit Suisse, and Allen & Company.

One more interesting thing that the company said in its filing is that it is a camera company, rather than saying they are a social media company. Snapchat has over 150 million in daily active users. Its filing showed that it has 158 million people using Snapchat on an average day, and they showed that over 2.5 billion Snaps are created every day. They are also largely made up of 18 to 34 year olds, and the company did more or less identify a risk that their target audience is fickle and may migrate away.

24/7 Wall St. showed in late 2016 that Snap was valued at about $20 billion at the time. It was also considered to be the most valuable American social media platform to go public since Facebook hit the trading floor in 2012 with an $81 billion valuation.

Snap admits that its advertising business is still young, but they show it is growing rapidly. Snap’s financial data, with a fiscal year-end in December, is as follows:

• For the year ended December 31, 2016, Snap recorded revenue of $404.5 million (versus revenue of $58.7 million in 2015).
• Its global average revenue per user, or ARPU, in the three months ended December 31, 2016 was $1.05 (versus $0.31 in 2015).
• In North America, Snap’s ARPU in the three months ended December 31, 2016 was $2.15 compared to $0.65 for the same period in 2015.
• For the year 2016, Snap generated a net loss of $514.6 million versus a net loss of $372.9 million in 2015.
• For the year ended December 31, 2016, Snap’s adjusted EBITDA was -$459.4 million versus -$292.9 million in 2015.
• For the year 2016, net cash used in operating activities was $611.2 million (versus $306.6 million in 2015).
• Free Cash Flow for all of 2016 was -$677.7 million (versus -$325.8 million in 2015.

Snap’s views in the filing suggest that the global advertising spend is expected to grow from $652 billion in 2016 to $767 billion in 2020, with the fastest growing segment being mobile advertising. The company’s filing said:

We believe that one of the major factors driving this growth is the shift of people’s attention from their televisions to their mobile phones. This trend is particularly pronounced among the younger demographic, where our Daily Active Users tend to be concentrated. According to Nielsen, people between the ages of 18 and 24 spent 35% 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.

The breakdown of the company’s three classes of shares was shown by the company as follows:

Class A common stock is non-voting. Anyone purchasing Class A common stock in this offering will therefore not be entitled to any votes. Each share of Class B common stock is entitled to one vote and is convertible into one share of Class A common stock. Each share of Class C common stock is entitled to ten votes and is convertible into one share of Class B common stock.

The holders of Snap’s outstanding Class C common stock are founders, executive officers, and directors of the company. With no votes, IPO share buyers have to trust that the company will run smoothly for years and years.

Snap ended 2016 with $987 million in cash and cash equivalents. Its total assets were listed as $1.722 billion versus almost $204 million in total liabilities.

Outlining all of these risks does not mean the IPO will be a dud. Chances are high that every tech fund out there has already been hounding their brokers to allocate shares in the IPO. That being said, it is very important for investors to really understand what they own.

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SNAP’s FIRST FULL IPO FILING

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