In what will be one of the tech industry's biggest floats to date, social media giant Snap is set to make its Wall Street debut this week with hopes to raise $3bn (£2.41bn).
Snap, the company behind the popular Snapchat app, wooed European investors last week in a IPO roadshow in London led by founder Evan Spigel, the 26-year-old who's set to rake in billions from the float on 1 March. However, Snap cut its target valuation to $16bn to $18bn from $25bn earlier this month.
Snap's investors include Chinese tech giant Alibaba that raised a record $25bn in its own New York float in 2014. In 2015, the Chinese e-commerce player reportedly invested $200m in Snapchat. The deal valued the Los-Angeles tech giant at $15bn at the time.
Spiegel and Snap's chief technology officer Bobby Murphy, who both own 227m shares each, are expected to be the biggest winners of the IPO. Other investors who'll go laughing to the bank include Benchmark Capital Partners and Lightspeed Venture Partners who will reportedly earn $3.2bn and $2.1bn respectively if Snap manages to hit a $25bn valuation.
A Californian private school, was yesterday revealed to be an early investor in the app, fuelling speculation it could rake in "tens of millions" of dollars from the IPO.
Saint Francis High School in Mountain View near San Francisco invested in the app through an investment fund. Lightspeed Venture Partners founder Barry Eggers, whose daughter attended the school, is widely reported to be responsible for persuading Saint Francis High School to invest in the social media app.
Britain's biggest charity, The Wellcome Trust, is also set for a $100m windfall from the IPO as it invested in Snapchat via an unnamed venture capital fund.
Snap IPO to sizzle to fizzle?
Going by the history of tech IPOs, the first year is always underwhelming. Shares in Groupon, Zynga, Facebook, Twitter and Fitbit, the last five tech giants with pre-IP valuations of $1bn, fell in the first year. According to Reuters, Facebook is the only company among the five to have recovered.
The median year-one performance among the biggest tech debuts globally was a decline of 22.3 per cent, with each falling about 30 per cent in their first 52 weeks.
According to Russ Mould, AJ Bell's investment director, Snap cutting its target valuation does not mean the "deal is going to flop but hopefully it does signify that investors are appraising the deal with a suitably dispassionate eye".
"Snap’s prospectus makes it clear the firm has more to offer than just the instant messaging service which made its name. Snap is positioning itself as a camera company and one that offers experiences that are much richer than a 10-second conversation. Its established internet and social media peers like Facebook, Alphabet, Alibaba and Tencent have done very well in the last 12 months."
However, Mould warned that investors should not be ready to pay any price for the shares.
"Snap is selling shares which will have no votes, so shareholders will have no voice or say in how the company is run. This may seem a good idea but it could leave investors high and dry if and when ever anything goes wrong - and not all gifted entrepreneurs make great business executives or managers."
According to Crunchbase, here's a list of Snap investors:
Alibaba Series - E (Lead)
Benchmark - Series A (Lead) and Series B
Coatue Management - Series C (Lead) and Series F
Fidelity Investments - Series F
General Atlantic - Series F and Series B
Geodesic Capital - Series F
GIC - Series D
Glade Brook Capital Partners - Series F (Lead)
GSV Capital - Series F
GSV Ventures - Series F
HDS Capital - Series D
IVP (Institutional Venture Partners) - Series B (Lead) and Series F
Kleiner Perkins Caufield & Byers - Series D (Lead)
Lightspeed Venture Partners - Seed (Lead), Series A, Series B
Lone Pine Capital - Series F
Meritech Capital Partners - Series F
Sequoia Capital - Series F
SV Angel - Series A and Series B
Tencent Holdings - Series B
T. Rowe Price - Series F
Yahoo! - Series D
York Capital Management - Series F