Snapchat has reportedly filed confidentially for its massive IPO

a) Why they need so much money? Don't tell me it's to produce some spectacles

b) Why they are worth so much? I get that they have an interesting user base (young people), but they are having a hard time making money, aren't they?

That $19b WhatsApp purchase hasn't exactly earned a lot of money yet, has it? It's still a very long bet, especially with Facebook being forbidden to collect the data now in some countries.

This could be a big litmus test for the tech IPO.

2 things I'm very interested in:

1) If the rumors are correct that they are looking to raise 4 Billion at a roughly $40 Billion valuation.

If you assume that their absolute pie in the sky max valuation ever is similar to what facebook is now, roughly 340 Billion, then that's not alot of upside for investors for a company that probably isn't yet profitable.

2) I've heard that the founders have locked up voting control. I'm always half watching companies like this to find out just how far they can push wall street before wall street says no more. Mark Zuckerberg and the Google founders have done a great job of managing their companies while maintaining voter control.

I want to see a tech company where the founders own voting control but manage the company like Twitter, this is not a positive reference.

If Snap get's their rumored IPO price but can't grow revenue then they could be the poster child for SEC minority shareholder reform, but then again President Trump has said he wants to remove regulation in the markets so.....

Twitter had a very dedicated and professional audience, journalists, investors, etc who used their product and they couldn't live up to expectations.

Snap now has to better than twitter and they'll have to do it by taking advertising dollars from Google and Facebook. That's a tough fight to get into.

b) They have one of the fastest growing user bases in the social space, their users spends an astounding amount of time on the app (estimated at 30 minutes per day), and their user base is the most targeted demographic for demographics. Also they have literally barely turned on the advertising machine and their initial forays have already hit a revenue run rate of $300M+.

So essentially they have a shitload of eyeballs, the eyeballs are growing massively, their eyeballs spend a lot of time on their app, and advertisers love those eyeballs. Their business valuation is based on massive potential, not current revenues, but their advertising efforts already show huge promise. There is almost no startup with anything close to their engagement, growth, and monetization potential and the last company that looked like them was Facebook. Hence, the HYPE.

WhatsApp was a possible existential threat to FB (usage moving from streams of posts from many many "friends" to more direct conversation in smaller chat groups), so $19B when spread across the many years of "non-death" of the company can be recuperated even if they don't earn a dime from WhatsApp thereafter.