Snap Inc., owner of the popular messaging app Snapchat, set a lower-than-expected valuation range on Thursday, amid mounting investor concern over its unproven business model, slowing growth and tight founder control.
After filing an initial public offering earlier this month, the company was broadly expected to be valued at between $20 billion and $25 billion. However it said on Thursday it was targeting a valuation between $19.5 billion and $22.3 billion, ahead of an investor roadshow due to start on Monday in London.
The lower valuation range reflected initial investor feedback. Snap wants to ensure there is sufficient demand for shares of the company that it trades up on its first day in public market.
Investors have been contemplating over the filing for Snap’s upcoming IPO to assess whether the still-unprofitable company will be the next Facebook Inc., which has figured out how to make money from its social media platform, or if it will be more like Twitter Inc., which is struggling to achieve the same goal.
Snapchat’s new active user growth was mostly flat in the early part of the last quarter in 2016, according to the IPO filing. Facebook's Instagram, which had 600 million users as of late 2016, has introduced its own form of disappearing video content. On average, Snapchat has 158 million daily users.
Snap, which is going public at a much earlier stage in its development than Twitter or Facebook, saw its loss widen to $514.64 million in 2016 from $372.89 million a year earlier. While not rare for a young company to be unprofitable, it is less common for an unprofitable company only five years old to ask for as whopping a valuation as Snap is aiming for.