Question: In 2016, there was speculation that Snap Inc., the parent company of Snapchat, was planning to have an initial public offering (IPO.) Finally, in February

In 2016, there was speculation that Snap Inc., the parent company of Snapchat, was planning to have an initial public offering (IPO.) Finally, in February 2017, Snap filed the paperwork with the Securities & Exchange Commission (SEC) indicating it was going to be issuing stock soon. Snap's IPO was expected to be the most expensive tech IPO in history with a valuation as high as $25 billion.

Snap planned to issue common stock class A in this IPO; the common stock class A shares will have no voting rights. Private investors own Snap's common stock class B shares, which provide one vote per share of class B stock owned. Snap's founders own its common stock class C shares, which give the two founders ten votes per share of class C stock owned. The two founders have control of Snap through their votes.

In March 2017, the opening price was $24/share, putting the company's market capitalization at about $33 billion, about the size of Marriott and Target.

For reference: At the time of Snap's IPO, Twitter's market capitalization was about $11 billion and Facebook's market capitalization was about $400 billion. At the start of 2020, Twitter's market cap was about $25 billion, while Facebook's was about $607 billion. (Facebook owned Instagram in both of these time periods.)

Fun facts about Snapchat:

Snapchat's original app name was "Picaboo."
Mark Zuckerberg of Facebook tried to buy Snapchat for $3 billion in November 2013; the founders of Snapchat rejected that offer.
The majority of Snapchat users are 18 to 24 years old.
On average, daily Snapchat users visit the app more than 20 times per day, spending about 30 minutes in the app per day.

Questions

1) When Snap issued the common stock class A shares, what impact did that stock issuance have on Snap's assets, liabilities, and equity?
2) Did this IPO have any direct impact on Snap's income statement? Explain.
3) What is the risk to common shareholders from having no voting rights?
4) What is Snap's ticker symbol, what exchange is it traded on, and what is the current market price of a share?
6) Would you purchase a share (or more!) of Snap stock? Why or why not?

Step by Step Solution

★★★★★

3.57 Rating (150 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

1 Snaps equity would rise as a result of the issuing of common stock class A shares but its assets and liabilities would not be directly affected The firms total assets would not immediately change as ... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

The Bluenose Ship Company executed an initial public offering five years ago by selling 10 million shares at $10 each after brokerage costs. At the same time, $50 million of 10% bonds maturing in 20...

In May 2007, TJX Co., the parent company of T.J. Maxx and other retailers, announced in a Securities and Exchange Commission filing that more than 45 million credit and debit card numbers had been...

In 2008 British Wallboard the parent company of Stonewall has seen enough of the volatility in the Canadian construction materials market and sells the company to a competitor US Corp Its subsidiary...

In 2016, there was speculation that Snap Inc., the parent company of Snapchat, was planning to have an initial public offering (IPO.) Finally, in February 2017, Snap filed the paperwork with the...

For the past year, there has been speculation that Snap Inc., the parent company of Snapchat, was planning to have an initial public offering (IPO.) Finally, in February 2017, Snap filed the...

hi there, i wanna know from the attach case what risks does alibaba face and how will this impact a debt issuance? identify changes in alibaba's capital structure in the period prior to and after the...

Use the case study as shown in the photo and your own research on Peloton to answer the following questions. (500 words each question, total of 2000 words) 1) Using the Business Model Canvas to...

In September 2017, Dara Khosrowshahi, was hired as chief executive officer (CEO) of Uber Technologies Inc. (Uber), with instructions to prepare Uber for an initial public offering (IPO) and repair...

Hernandez Tool Manufacturing just paid 1.72 dividends to its stockholders. It is a mature firm that has consistently increased dividends by 4.35% over the last 5 years. The shareholders could earn...

A $5000, 8% bond with semi-annual coupons redeemable at par in 10 years is purchased to yield 10% compounded semi-annually. What is the purchase price?

Which is a correct statement under the accrual method of accounting? Group of answer choices A company recognizes revenue when earned or it consummates a sale A company recognizes expense when it...

An e -1 moving with the speed of 10 8 m/s enters a magnetic field of 410 3 T m a direction ar to the field Calculate (a). Radius of path (b). Frequency of revolution of e -1

On May 1, Robert Neupert started skyline flying school, a company that provides flying lessons, by investing $45,000 cash in the business. Following are the assets and liabilities of the company on...

(1 point) Parameterize a vase formed by rotating the curve z = 4yx- 1, 1

Find parametric equations for the sphere centered at the origin and with radius 3. Use the parameters s and t in your answer. x(s, t) D y(s, t)%3D , and z(s, t) = , where and

Parameterize the plane through the point (-5, 1, -5) with the normal vector (-2, -2, 2) F(s, t) = (Use s and t for the parameters in your parameterization, and enter your vector as a single vector,...

Articulates a vision of the future, intellectually stimulates subordinates, and motivates them to use their imagination to advance the organization. Group of answer choices Transformational Leader...

The thickness of lens flters that are precision cut by laser trimmers at Upton Cameras main manufacturing operation is carefully monitored. Below are the thickness measurements in millimeters for...

Refer to Exercise 7. In exercise For users making video calls on Skype, the rate of dropped calls has historically been no more than 3% (. 03). In a random sample of 200 calls using Skypes recently...

The Lundberg Survey monitors gas prices at gas stations nationwide. In a recent month, Lundberg reported that the average regular gas price for the stations it surveyed was $3.506 per gallon. Assume...

=+a. If a 1 is sent from the transmitter, what is the probability that a 1 is sent by all three relays?

=+what is the probability that it came from line 1?

=+a. What is the probability that the average resistance in the circuit exceeds 105 ohms?