Snapchat's S-1/A Risk Factor Summary: An exposing and honest report - "the growth rate of our user base will decline"
Over the past 6 months growth has slowed for Snapchat. The release of Instagram stories, a Snapchat clone inside the Instagram app, has promoted a slight but significant loss of users.
Snapchat has made no claim that there are not risks associated with investing in their company. They made this clear in their S-1 filing.
An S-1 filing is used by companies planning on going public in the stock market. These documents are boring to read. However, the S-1/A filed by Snap Inc. (Snapchat) on February 24th 2017 is a very interesting read.
Despite the risks, Snapchat has around 150 million daily active users. Their revenue has grown tremendously quick as well. Snapchat made it's first dollar of revenue in late 2014. Now they are doing over 400 million dollars a year in revenue.
Snapchat Risk Factory Summary:
Our business is subject to numerous risks and uncertainties, including those highlighted in “Risk Factors” immediately following this prospectus summary. These risks include:
• Our ecosystem of users, advertisers, and partners depends on the engagement of our user base. We anticipate that the growth rate of our user base will decline over time. If we fail to retain current users or add new users, or if our users engage less with Snapchat, our business would be seriously harmed.
• Snapchat depends on effectively operating with mobile operating systems, hardware, networks, regulations, and standards that we do not control. Changes in our products or to those operating systems, hardware, networks, regulations, or standards may seriously harm our user growth, retention, and engagement.
• We rely on Google Cloud for the vast majority of our computing, storage, bandwidth, and other services. Any disruption of or interference with our use of the Google Cloud operation would negatively affect our operations and seriously harm our business.
• We generate substantially all our revenue from advertising. The failure to attract new advertisers, the loss of advertisers, or a reduction in how much they spend, could seriously harm our business.
• Our two co-founders have control over all stockholder decisions because they control a substantial majority of our voting stock. The Class A common stock issued in this offering will not dilute our co-founders’ voting control because the Class A common stock has no voting rights.
• If we do not develop successful new products or improve existing ones, our business will suffer. We also invest in new lines of business that could fail to attract or retain users or generate revenue.
• Our business is highly competitive. We face significant competition that we anticipate will continue to intensify. If we are not able to maintain or improve our market share, our business could suffer.
• We have incurred operating losses in the past, expect to incur operating losses in the future, and may never achieve or maintain profitability.
• The loss of one or more of our key personnel, or our failure to attract and retain other highly qualified personnel in the future, could seriously harm our business.
• We have a short operating history and a new business model, which makes it difficult to evaluate our prospects and future financial results and increases the risk that we will not be successful.
• If our security is compromised or if our platform is subjected to attacks that frustrate or thwart our users’ ability to access our products and services, our users, advertisers, and partners may cut back on or stop using our products and services altogether, which could seriously harm our business.
• Our user metrics and other estimates are subject to inherent challenges in measurement, and real or perceived inaccuracies in those metrics may seriously harm and negatively affect our reputation and our business.
• We are not aware of any other company that has completed an initial public offering of non-voting stock on a U.S. stock exchange. We therefore cannot predict the impact our capital structure and the concentrated control by our founders may have on our stock price or our business.