Snap’s IPO, one of the largest IPOs of recent times, is about to open on the Wall Street and the owners of Snapchat expect that the investors will hold at least a quarter of shares of this $3.2 billion IPO for close to a year. It is the first time in the history of IPO that a company is going public, but issuing non-voting shares. The shares that are available through the IPO are of class A, which will grant no voting rights to the holder of the shares irrespective of the quantity.
Snap is fully confident that the investors will welcome its IPO with open hands. It also believes that though there is no binding commitment as of now, the investors will keep it for a year at least. The companies usually follow the route of lock-up periods to moderate stock volatility as then those having inside information cannot sell their shares in that time frame. If any company goes for a lock-up period of one year, it generally signifies that there is strong demand for the IPO of that company.
Snap Inc. targeting a valuation of somewhere in the range of $19.5 – $22.3 billion is looking forward to selling 200 million shares in the price range of $14 to $16. People familiar with the process said that the orders have started pouring in for the higher end of this range and the IPO is already oversubscribed. Initially, there was news of boycotting the IPO as the shareholders were not having any say in the management of the company due to the issuance of the non-voting shares. But given that the IPO is already oversubscribed, the boycotting news turned out to be a rumour.
In the updated IPO registration document that the company has submitted to the U.S. Securities and Exchange Commission on Monday, it clarified that it expects one-fourth of Class A common stock that is 50 million shares to be kept for a one-year lock-up agreement. There is nothing unusual in such an expectation from the company. Most of the companies do this to prevent the volatility and get some stability in the performance on the stock markets.
This biggest IPO since the Facebook IPO is right now the centre of attraction. The other tech companies that have plans to go public this year are also observing it with special interest as it will help them gauge the mood of the investors.