Snapchat files for blockbuster $25bn IPO

It would take more than a new leader of the free world to stop a former Harrier jump jet pilot getting his AIM float away. And, while the share price hasn't exactly taken off, Ed Molyneux's accounting software start-up FreeAgent is at least now a quoted company and in positive territory.

Institutions backed a "transformational" placing worth £10.7 million at 84p, valuing the business at £34 million. That's an achievement, given Donald Trump's election victory was tipped to ruin the mergers and acquisitions (M&A) industry - according to a survey by M&A deal management tech firm Intralinks, 56% of dealmakers thought a Trump presidency would have a negative impact on M&A activity.

Well, in a couple of days' time it will have company. Civitas Social Housing, a real estate investment trust (REIT), today confirmed an oversubscribed £350 million fundraising as part of its listing on the main market.

Buying already-built social homes in England and Wales with occupancy agreements of 10-40 years, should underpin a dividend yield of 5%, growing in line with inflation.

Again, great news. American energy producer Diversified Gas & Oil also chose polling day to announce plans to raise £48 million from its own IPO on AIM next month.

A beast stirs

But over the pond, a beast is stirring. According to reports, Snapchat owner Snap has just secretly filed an application with the Securities and Exchange Commission to IPO, possibly next March.

Figures being thrown around value the five-year-old business at anything between $20 billion(£16.1 billion) and $25 billion. Get that kind of money and the image messaging app, created by Stanford University pals Evan Spiegel, Bobby Murphy, and Reggie Brown, would be the biggest float since Alibaba in 2014.

Three years ago, Facebook's Mark Zuckerberg made a cheeky bid worth $3 billionThen, Jack Ma's Chinese internet giant bagged $25 billion from a high-profile float, beating Agricultural Bank of China's $22 billion four years earlier, and Facebook's chaotic $16 billion IPO in 2012.

It's interesting to see that Alibaba already has a stake in California-based Snap, as does Yahoo, which also made billions from the Alibaba listing.

They and other shareholders took part in Snap's last $1.8 billion fundraise in May, which valued the business at around $18 billion. Three years ago, Facebook's Mark Zuckerberg made a cheeky bid worth $3 billion!

ii editor Lee Wild was so excited at Snapchat's IPO news he took his first ever snap.

Prospects?

So, what about prospects? A glance at how Facebook, Twitter and Alibaba have performed since the latter's IPO is revealing. Twitter is down around 64% and Alibaba 3%, while Facebook has rocketed 50% and has tripled since its own listing. The S&P 500 is up 8%.

Greater monetisation is perfectly achievable, but investors must accept a high level of riskRemember, we know Snap's revenue is less than 10 figures as the confidentiality around its IPO filing is only afforded to companies with revenues below $1 billion.

However, it does have a daily audience of 150 million users, more than Twitter, and its young audience is exactly what advertisers love.

Researcher eMarketer recently forecast Snap could generate $367 million of ad sales this year, $935 million in 2017 and $1.7 billion the year after. There's also a lot riding on Snap's camera-equipped sunglasses, called Spectacles.

So, greater monetisation is perfectly achievable, but investors must accept a high level of risk in backing management to deliver a performance more like Facebook than Twitter.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.