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Snap Incs IPO A And B Case Solution

Solution Id Length Case Author Case Publisher
2129 583 Words (3 Pages) Marco Di Maggio Harvard Business School : 218006 And 218052
This solution includes: A Word File A Word File

During Feb and March, Snap Inc. aimed to hit on the New York Stock Exchange as it decided to go for an IPO. Its issue of non-voting shares made investors quite uncertain about whether to invest in Snap as the company had been experiencing loss in 2016 and also had a negative cash flow. However, the company has been constantly engaged in innovation and coming up with new products to establish itself as a camera company and not just an app, which has allowed it to lock multiple sources of revenue and ensured business sustainability.

Following questions are answered in this case study solution

  1. Executive Summary

  2. Why do you think Snap’s owners chose to issue non-voting shares to the public in the IPO? Would you buy such shares?

Case Analysis for Snap Incs IPO A And B

It is, for this reason, Snap's IPO price was expected to be higher. Also, the institutional investors oversubscribed its shares because they believed its share price to rise, given its speedily growing user base and popularity globally together with investments in various complementary technologies. Soon after the IPO, Snap Inc.'s share price increased, reaching $24 from $17 (IPO price), and the Morgan Stanley rated it as a buy stock given its strong revenue potential and highly engaged user base.

2. Why do you think Snap’s owners chose to issue non-voting shares to the public in the IPO? Would you buy such shares?

During Feb 2017, Snap announced its intention to hold an IPO and aimed to sell 145 million shares with a target price ranging between $14 to $16 per share. However, Snap did not allow any voting rights to its class A of stockholders, the only class to whom it offered its shares as part of its IPO. Hence, this was the first IPO, which just comprised of a non-voting class of shares. The owners chose to issue the non-voting shares to the public so that they can have tighter control over the whole business and the relevant decisions. Also, as both the owners of the company, Spiegel and Murphy would have Class B and Class C shares which gave them voting power, they would have the authority to control matters pertaining to the election, removal or replacement of any director on the board and even would have the final say about any merger, consolidation or sale of the business assets.

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