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Food day subscribers thank you so much for joining me today i am jeremy this is a financial education channel in today we’re looking at the snapchat ipo snapchat is filing to go public tomorrow guys tomorrow it’s finally gonna happen one of the most anticipated filings of a company going public probably since facebook back in 2012 guys this is a highly hyped stock
Everybody super psyched about it it’s gotten attention from people that don’t even have anything to do with the stock market know about this ipo guys this is huge this is huge so i promised you guys i would do an in-depth look at snapchat and give you my opinion on it and if i’ll be investing in it or if i’ll be investing in anytime soon if i’m not and i promised
You guys that and today i’m delivering that guys one day before the ipo i hope you guys enjoy it leave it a thumbs up today and let’s get right into this guys so first off snapchat they launched in about mid 2011 guys so about right about 6 years ago it’s amazing where this company has gone in the past six years they launched as like a picture app that the messages
Delete it very quickly it launched only on ios and then they expand it to android then things went from there about a year and a half after they had actually launched the app they had a million daily active users already then they introduced video as you guys see in these timelines hear stories filters by by mid-2014 they had 50 million daily active users guys they
Release things like chat geofilters they didn’t do their first advertisement as far as the first paid advertisement on snapchat did not happen guys until late 2014 so snapchats been getting ad revenue for less than three years at this point guys absolutely amazing when you fast forward throughout 2015 then they had a hundred million daily active users – now they
Have over a hundred and fifty million daily active users they have a lot of different things you can do within the app group chat you know memories all those kinds of things guys so snapchat is an amazing story guys this is this proves to you how fast things can happen now the internet’s just changed the world in how seemingly nothing could come out of something
And grow to be a twenty-something billion dollar market cap a twenty-something billion dollar valuation in less than six years guys mind-blowing mind-blowing stuff so snap they say they’re a camera company we believe that reinventing the camera represents our greatest opportunity to improve the way people live in communicate our products empower people to express
Themselves live in the moment learn about the world and have fun together guys that is a beautiful that is beautiful snapchat but we want to know how do you make money in are you gonna make money for us if we’re gonna buy into your stock because that’s what we friggin care about so let’s get into this guys so this is huge here guys these few lines this is really the
Promise behind snapchat we benefit greatly from the fact that many of our users are in markets where we have the highest capital efficiency and monetization potential allowing us to generate revenue and cash flow that we can then invest into future product innovation worldwide advertising this is a huge part worldwide advertising spend is expected to grow from six
Hundred and fifty two billion in 2016 to seven hundred and sixty seven billion in 2020 the fastest growing segment in mobile is mobile advertising which is expected to grow from nearly three times from sixty six billion in 2016 to around two hundred billion dollars in 2020 guys so the promise behind snapchat and the reason you’re you would be excited as an investor
Of snapchat one snapchats playing catch-up in getting advertisers to the platform snapchat we’ve ordered over 150 million daily active users in a very short amount of time and advertisers did not you know advertise on snapchat for a longest time and they’re trying to play catch-up so that’s number one advertisers playing catch-up to really i mean steph’s revenue
If they had maxed out what they should be advertising their revenues are probably three to four times more than what they are right now so they’re playing catch-up with that also the whole entire advertising market is going to go greatly up over the next few guys we see this statistics there from about 650 million now to about 770 million in 2020 so the whole
Advertising the whole pie to eat is getting bigger the whole pie to eats getting bigger for snapchat and on top of that snapchats a mobile app a mobile app and those mobile ads are going up three times three times over the next few years guys so snapchats in the sweetest of the sweet spots guys they’re in a growing segment their advertisers have to play catch-up
To them and their mobile which is growing insane over the next few years guys the amount that people are gonna have to pay for ads is gonna go up drastically the amount of advertisers coming online to advertise on mobile is gonna go up drastically guys so huge stuff and that’s the promise behind snapchat that’s the biggest thing snapchat has going forward as far as
Making money as an investor so let’s go through some more pros and cons here with snapchat so this is in the risk factor section talking about some of the risk factors with the company there – i want to point your attention to one the first one is our ecosystem of users advertisers and partners depends on engagement of our user base we anticipate that the growth
Rate of our user base will decline over time if we fail to retain our current users and/or add new users or if our users are less engaged with snapchat or business would be seriously harmed and the last one is our two co-founders have total control over all stockholder decisions because they control substantially the majority of our voting stock the class a common
Stock issued in this offering will not dilute our co-founders voting control because of the class a common stock has no voting right so that right there guys is huge that’s right though those lines are very important because snapchat is highly dependent on if they cannot grow another platform if they cannot grow another snapchat or just keep expanding snapchat to
The place where they have a billion users or something like that if they cannot do that then they at least have to keep their current users and that’s a hard thing to do especially if new users don’t come online guys so there are a tough spot there and then also if you’ve betting on snapchat stock if you’re an investor and snapchat stocks especially if for a long
Term you’ve got to understand the company is in the hands of the two co-founders they control all the decision-making you you might have voted you don’t you don’t have any voting rights guys they’re not getting they’re not giving up their voting rights so you’re not gonna be able to vote for board of directors and things like that it’s not gonna count for you so
Understand those two things guys understand those very important keys but let’s look at some numbers here guys let’s look to some revenue numbers and profit numbers so revenue 2015 they did 58 million dollars in revenue 2016 they did over four hundred and four million dollars in revenue and they’re talking about a possibility of over a billion dollars in revenue
In 2017 guys but net lost down there they lost 372 million dollars in 2015 it lost over a half a billion dollars last year guys so yes revenues are growing great but their game they’re the losses are adding up they’re getting bigger and bigger now that doesn’t mean they can’t turn that around and and become a company that is profitable because we’ve seen a ton of
Silicon valley startups go from companies that were losing money absolutely but the revenue kept growing at such a rate that finally they became profitable and then they became ultra profitable facebook look at how profitable facebook is now you know almost every dollar that comes in go straight to the bottom line pretty much they get in now it’s ridiculous guys
So that could happen with snapchat but also on the other hand it’s very possible this company can never be profitable guys they even say that in one of the risk factors we may never be profitable only time will tell let’s look at this balance sheet here guys they have around nine hundred and eighty seven million dollars in cash and cash equivalents guys they have
Basically almost no debt at all their guys and total liabilities in general is only 203 million that’s all of the liabilities added up together and then when you take on top of that after this ipo the funds are gonna raise and whatnot they’re gonna get over or i think it’s around 2 to 2.5 billion dollars that’s going to go straight toward that cash line guys so then
They’ll have around three to three and a half billion dollars cash sitting around guys with virtually no debt so they’re in a very good financial position as far as the balance sheet goes the income statement not so well i mean when you’re losing over a half billion dollars that’s not that’s not a good thing but their balance sheet is freaking phenomenal so even
If those losses continue for a few more years they can weather the storm because they got a ridiculous amount of cash but that even haven’t erased more money guys so this is very interesting here guys so snapchat is a free and easy to join the barrier to entry is low for new entrants in the switching cost to another platform is also low moreover the majority of
Our users are 18 to 34 years old about 85% of our users are in that age bracket guys 18 to 34 this demographic maybe less brand loyal and more likely to follow trends than other demographics these factors may lead users to switch to another product which which would negatively impact our retention growth and engagement all those kinds of things for example users
25 and older visited snapchat approximately 12 times and spent approximately 20 minutes on snapchat every day now a 25 and younger they visited about 20 times and spent over 30 minutes guys so the younger crowd the 25 and under is really strong with snapchat there’s 25 and older and not so much in the 35 and older much less so guys so i think this is important to
Look at is is snapchat just hot right now and are they gonna fade off or can they get older users they got any i mean if they’re just gonna stick in that 85 percent they really need to get older users on they need to get 40 year olds and 50 year olds or 60 year olds can snapchat do that that’s a big question mark for anyone that’s investing in the stock for the
Long term guys big question mark there so another thing here guys this is this is interesting this is actually you know brilliant here los angeles company known as snapchat messaging app generated the is is gonna generate the largest initial public offering in southern california history on wednesday raising at least 3.4 billion dollars while valuing the firm
At about twenty three point eight billion dollars the snapchat ipos most lucrative in the us since the online shopping company alibaba raised 22 billion in 2014 the biggest for tech companies since facebook which did 16 billion dollars in 2012 guys absolutely amazing this is the biggest ipo in southern california history snapchat so i just want to point that out
Because it’s very interesting and i also want to point out because 24 billion dollar valuation basically this company has that’s losing a half billion dollars a year right now might be a little steep guys but maybe you’ll all pay off so here’s what some of the people that are selling out so you haven’t spiegel he’s still going to be you know he’s still gonna have
A ridiculous amount of shares same with bobby murphy the other co-founder but they are selling about two hundred and seventy two million dollars worth of shares each of them so the snapshot is gonna get about 2.5 billion dollars in cash from this ipo like i spoke about guys now these are a few factors we have to take into account people or asking them is snapchat
The next facebook is snapchat you look in the next twitter we’re gonna go into that in just a second but first we have to acknowledge something this is something not a lot of people think about not a lot of people think about this okay who or what age group or the majority of money managers the majority of hedge fund managers the the majority of people that
Have let’s say millions of dollars to invest tens of millions of dollars to invest hundreds of millions dollars what age group are most those people in there in the 40 plus year old age group guys right 40 50 60 year old those are the people that have the huge amounts of money that control the hedge funds and a lot of these mutual funds and can really decide if a
Stock is bought a lot or not bought a lot right well snapchats problem is the majority of their users are all in a bracket that does not fit that club of wealth that does not fit that club of buying power right for investing so the question was snapchat is is snapchat gonna have a hard time really getting those people those money managers those 40 50 60 year-olds
To realize the opportunity of snapchat because that’s who they have to convince that to snapchat has to convince if snapchat is gonna go up drastically over over the coming years i mean it could pop on anything you know tomorrow if it goes public who knows maybe it goes to $30 a share maybe it doesn’t who knows but if they’re gonna do good long-term they gotta
Convince those 40 50 60 year-olds who are controlling billions of dollars and funds to invest in snapchat can they do that it’s a big question mark guys it’s a hard thing to do when it’s a product or service that a lot of those people probably don’t even use or i have ever used or really understand guys so they a lot of work you know ahead of snapchat for people
To really understand it now this holt is snapchat the next twitter is snapchat the next facebook right now right now this is right now snapchat to me is the next twitter not the next facebook here is the reason twitter has twitter and that’s it they have a few other little things but nothing material that really business changing right snapchat what do they have
Right now snapchat do they have anything else material going on that’s really gonna add up to billions of dollars in revenue billions of always a profit no they do not they’re a one-trick pony at the moment they have some other stuff they’re trying but nothing is even close to being proven yet facebook on the other hand what do they have they have facebook though
Which is the biggest social platform in the world over well over a billion users right they had instagram which is approaching a billion users now they have whatsapp which is over 1 billion users guys and they have other little things going here and there but those are the three main and things that make facebook a special stock three huge platforms that have over
Billions of users all combined to them snapchats over here with 160 million 150 million daily active users and that’s what they have right now guys that’s what they have so in order for snapchat to be or in order for snapchat to become the next facebook they need to get some other brands or some other things going for them that are really going to be material that
Will take snapchat from a 24 billion dollar valuation to a hundred billion dollar valuation a two hundred billion dollar valuation that’s what snapchat has to do otherwise what snapchat is going to happen a snapchat the same thing that happened to twitter the the the youth a user growth is gonna slow and then advertising dollars will start to slow because there’s
Less users coming online and then it’s just gonna be a stock that’s just hanging out there waiting for someone to buy them or somehow create something great again guys so that is why i feel snapchats closer right now to a twitter and then a facebook but that doesn’t mean that’s always gonna be that way guys snapchat could come out with another great platform that
Will get people that say or acquire one like facebook acquired whatsapp they also acquired facebook guys or excuse me they also acquired instagram facebook acquired their other two big dogs back when they were a lot smaller of course but they acquired them and that’s why facebook has evaluation if you took away instagram or you took away whatsapp from facebook
Right now facebook would have a valuation probably sixty to seventy percent less than it does currently if facebook stocks around 140 bucks right now that would be probably a twenty to thirty dollar stock maybe thirty five dollar stock if it was only facebook guys so that’s what’s important for snapchat a lot of opportunity in snapchat but also a lot of risk in
Snapchat i will not be buying the ipo i will be following this company very closely as time goes on guys because they doing some good things going for me it’s just the question of can they grow beyond snapchat and that’s what i’m looking for if i’m a long-term investor which i am guys you know i’m looking for at least a year out it’s not three years out so we’ll
See you guys so let me know in that comment section if you guys are buying the snapchat i feel i would love to know from you who knows maybe it could pop on the the first few days maybe pop for the first month maybe you could do like a gopro and go from twenty four dollars to 98 dollars a few months later who knows and maybe it could shoot down remember facebook
Stock that came out when it was public it kind of was like even and then it dropped significantly guys he came out of 38 dollars nick so you know was that nineteen dollars guys that stock had dropped 50% in like six months after it was ipo guys and i was buying in and then i sold out why did i sell out oh stupidest thing i ever did in my life anyway so thank you
For watching guys i hope you enjoyed this you may want to subscribe we talked personal finance and channel we talked entrepreneurship on the channel we talked stock mariano’s channel thank you have a great day you
Transcribed from video
Snapchat IPO in depth! Snapchat next Facebook? By Financial Education
