Snap IPO Values Photo-Chat App Maker at Twice Facebook's Worth

Snap, maker of the disappearing photo app dependent upon the fickle favor of the millennial demographic, is going public at a valuation at least twice as expensive as Facebook, and four times more costly than Twitter.

Snap sold 200 million shares in its initial public offering at $17 each, according to a statement. At that price, it has a market value of about $20 billion, based on 1.16 billion shares outstanding after the IPO. That implies a multiple of about 21.4 times EMarketer’s estimate for Snap’s 2017 advertising sales.

Snap raised $3.4 billion in its IPO, pricing shares above the marketed range, in the biggest social-media IPO since Twitter more than three years ago. It’s also the first tech company to list in the U.S. this year.

Snap, which posted a net loss last year of $515 million, even as revenue climbed almost sevenfold, has some things to prove. It needs to continue to increase revenue per user, address slower user growth, which fell below 50 percent in the fourth quarter for the first time since at least 2014, and inch closer to profitability.

Facebook, with about 1.2 billion active daily users on its flagship platform and 1.2 billion on its messaging tool WhatsApp, trades at a multiple of about 10.5 times revenue estimates for this year. Facebook’s Instagram introduced a video-reel feature, similar to Snapchat’s stories, that already has 150 million daily users. That’s in line with Snap’s daily active count of about 158 million.

While Facebook’s shares languished for more than a year after its IPO, the stock surged once the company’s strategy of betting on mobile software started to pay off and revenue and profit exceeded estimates. Twitter, with more than 300 million monthly active users, comes in at 4.8 times projected revenue. The social media site had an impressive debut, then proceeded to stumble as user growth slowed. Snap faces what those companies faced, with one proven product to date under its belt.