In preparation for its highly anticipated IPO, Snap – parent of the popular messaging app Snapchat – is wasting no time meeting with potential investors, according to the Wall Street Journal. Typically, the road show does not begin immediately after a company files to go public. Known as the "quiet period," companies are required by the SEC to be silent about their IPO for 40 to 90 days so as to not inflate the value of the stock artificially.
But Snap, which filed confidentially for an IPO last month, is wasting no time. The confidential filing was in accordance with the 2012 Jumpstart Our Business Startups Act, "which allows companies with annual revenue of below $1 billion to file an initial draft of their IPO prospectus with regulators and make adjustments before unveiling it publicly," reported the Journal. (For more, see also: Snapchat Finally Files for $3B IPO.)
Snap's IPO, which could debut in March, might raise enough money that would put it at a valuation between $20 billion and $25 billion, noted the news outlet.
Testing the Waters
Snap is reportedly trying to lure investors with the appeal of its youthful user base, the majority of which belong to the prized 18-to-34 demographic. Citing Nielsen figures, the Journal added that "more than 150 million people, including 41% of 18-to-34-year-olds in the U.S., use Snapchat daily."
It does help that these meetings, also known as "testing the waters," which helps a company figure out whether it should go public or not based on investor feedback, have coincided with Snap releasing its third-quarter earnings. Although Snap has not provided investors with full-year projections of its 2016 revenue, the Journal noted that the company is well on its way to generating $350 million by the end of the year, beating its original target by more than 10%.
In 2015, Snap raked in only $60 million in revenue; however, earlier this year, the company told investors that it expected to earn $1 billion for 2017, reported the Journal. (For related reading, see: How Snapchat Makes Money.)
Another way that Snap is trying to elicit commitments from investors is by showing them how to use the app, sources told the Journal.
Tapping the Public Market
Bankers and investors believe that if Snap has a smash IPO debut, that could prompt other highly-valued unicorns to go public as well, added the Journal. If Snap’s IPO can hit its expected valuation, this would be the biggest tech debut of a U.S. stock since Chinese e-commerce Alibaba Group Holding Ltd (BABA) bowed at a $168 billion valuation in 2014.