It is Snapchat A which is found in your course pack. You are to turn in an excel

• a) excel spreadsheet with formulas for calculations. The spreadsheet should show cash flow, WACC calculation, firm valuation, and stock price.
• b) Word document representing an Executive summary of the analysis, findings, and recommendations.This is limited to two pages using.
  • Word document is limited to two (2) pages using. Any amount over two pages and points will be deducted.

Snap Inc.'s [PO (A) On March 1, 2017, Wall Street investors focused their attention on Snap Inc. (Snap). The California- d to make its debut on the New York Stock based entity, selfdescribed as a camera company,1 planne Exchange (NYSE) the followings day in a highly anticipated initial public offering (1P0). Launched in enabled users to share self- 2011, by Evan Spiegel and Robert Murphy, Snap began as an appa that deleting pictures. The app, later named Snapchat, grew rapidly over the next ve and a half years, acquiring more than 158 million daily active users (DAUjz By 2017, the company aimed to become a major player in the mobile advertising segment. Prior to its 1P0, Snap raised more than $2.6 billion in private funding, fetching valuations in excess of $20 billion.3 With a market hungry for large tech lPOs, investors hoped that Snap's [PO would initiate a trend among large tech companies looking to issue equity in 2017. Snap planned to sell up to 230 million shares,c or 19.6% of the company. The market initially speculated that Snap would look for a valuation upwards of $25 billion.4 Snap surprised the markets, pricing its 1P0 at $17 per sharea valuation of $23.6 billion.5 Although higher than the $14 to $16 range outlined in early SEC filings, some industry observers thought that Snap priced the [PO conservatively to attract investors potentially \"squeamish over too rich a price.\" Others pointed out that the [PO was likely oversubscribed, and that the company was issuing shares at essentially the same valuation as its last funding round.7 Did these signs indicate that Snap's share price would jump before trading even commenced? Other investors remained skeptical, believing that the price was too high for a company that posted losses of $515 million in 2016.3 In addition, the company continued to burn cash, generating a negative operating cash flow of $611 million during the same reporting period.9 Competitors included Facebookowned Instagram, which had duplicated several of Snapchat' 5 core functious, and was close to catching up in terms of users. Beyond competition, investors also voiced concerns with Snap's Snap had proven it could come up with creative products, such as My Story, and it had also shown that it was capable of pursuing hardware launches, as exemplified by Spectacles. Interest from institutional investors remained very high, to the point that in the hours prior to the IPO, the underwriters adjusted the final price to $17 per share, above the targeted price. 98 However, many investors remained skeptical. The first and biggest concern was the company's valuation. While the total valuation at $17 per share was somewhat lower than what the media had speculated, this value could quickly increase on the opening of trading, given that it was known that institutional investors heavily oversubscribed the IPO. With so much uncertainty, some observers studied and compared Snap to the performance and multiples of its closest competitors at the time of and immediately after their IPOs. Would Snap follow a path similar to that of Twitter, trading at high multiples immediately post IPO? Or would it mimic Facebook, which, "cratered out of the gate . . ."99 (See Exhibit 13a and 13b). Even at $17, there were several factors that indicated the valuation might be too high. In terms of its price-to-sales ratio, the Snap IPO was bound to be one of the most, if not the most, expensive tech IPO ever (Exhibit 14). 100,101 Snap remained unprofitable, and it burned a significant amount of cash in 2016. (For financial data on Snap compared to its competitors' at the time of their respective IPOs see Exhibit 15) Therefore, a major portion of its value came from the expectation that Snap would be able to monetize and continue to grow its user base. In terms of monetization, it still significantly lagged Facebook. Worldwide average revenue per user (ARPU) for Snap stood at $1.05 in the fourth quarter of 2016, compared to $4.83 per Facebook user. In the U.S., Snap's biggest market, its ARPU stood at $2.15 during the same period, almost 10 times lower than Facebook's $19.81 (Exhibit 16a and Exhibit 16b). Snap would need to increase its ad load (defined as advertisements per DAU, per hour) in order to compete. According to one report, Snap's 2016 ad load was 0.6 advertisements per daily average user per hour. This lagged Facebook, Twitter and Instagram who boasted ad loads of approximately 50, 100 and 7 respectively. 102 Moreover, Snap's quarterly DAU growth of 3.26% placed it at a much slower pace than those of Facebook and Twitter at their IPO dates (Exhibit 17). 103 Another concern was the significant control both co-founders would retain in the company. Spiegel and Murphy, 26 years old and 28 years old, respectively, at the time of the IPO, would retain control of most of the voting shares (for a list of board members and their biographies, see Exhibit 18a and Exhibit 18b). Investors were concerned that they wouldn't have a say as the company tried to grow dramatically and become profitable in a highly competitive landscape. 104 Would Snap's Shares Jump? Many questions remained. How much was Snap truly worth? Would Snap deliver on its growth? How concerning were its governance issues? All of this would play a part in Snap's early days of trading. The market watched closely as Snap's shares began to trade.Exhibit 1 Snap Inc. Timeline Images Snapchat Picaboo is renamed- Video Snapchat is born! Android Snapchat launches Snapchat adds video. Users on Android can now sand picture and video mestages. Launch Snapchat begins as Picaboo, a picture 100k 1m messaging app on IOS. 1k daily active users daily active users daily active users 2013 2011 2012 LO First Ad A "Brand Story" for the film Oui's becomes the OUN first paid advertisement to run on Snapchat. Live Story Snapchat launches its first Live Story. 2015 Party curating thousands of perspectives goat at from users at a music festival into one edc community narrative. Stories 50m dolly active users Snapchat launches Stories. Users VENICE can watch the Story of a friend's day in the order it happened! Geofilters 2014 Chat Geofilters launch. Users can show friends where they are Snapchat adds Chat. with location-specific artwork. Now users can send texts and video chatel Smart Filters & Replay Snapchat introduces Smart Filters (timeSnap Inc.'s IPO (A) 18-006 Group Chat Memories Snapchat adds Group Chat Now users can communicate Memories launches, giving users a with up to 16 friends on place to save their favorite Snaps and inapchat at the same time Stories, and then relive them later. Chat 2.0 Spectacles Snapchat redesigns Chat by adding Stickers, voice 150m Snap Inc. releases Spectacles and video calling, and voice and video notes. dely active unglasses with an integrated which all can be sent in a Chat conversation. ideo camera that makes it easy to create Memories. Bitmoji HESOT Snapchat adds 2016 Bitmojis, a new way to Lenses create a personalized cartoon avatar and enses launch on Snapchat. 100m daily active send it to friends. Users barf rainbows for the first time. . Y On-Demand Geofilters International With On-Demand Geofilters, users Snapchat's first internation can now design and buy a filter to sales office opens make any get-together more fun. Discover Discover launches, featuring Publisher Stories with premium video cont Source: Snap, Inc., February 2, 2017 Form S-1 (filed February 2, 2017), https:/ /www.sec.gov/ Archives/edgar/data/ 1564408/000119312517029199/d270216ds1.htm, accessed November 2017. F4 FS F6 F7 DDExhibit 2 Snap Inc. Pre-IPO Reported Funding History (in millions of USD) Round Date $ Amount $ Valuation Range Seed May-12 0.485 Feb-13 13.5 60 70 Series A Series B Jun-13 80 800 Secondary Market Jun-13 20 Series C Dec-13 50 2,000 Series D Dec-14 485 10,000 20,000 Series E Mar-15 200 16,000 Series F May-16 1,800 20,000 Total $2,649 Source: Adapted from "Snap Inc. Funding History," https://www.crunchbase.com/ organization/snapchat/funding-rounds, accessed July 2017. Note: - Indicates amounts or parties which were not disclosed. Exhibit 3 Company Positioning Snap Inc. is a camera company. We believe that reinventing the camera represents our greatest opportunity to improve the way people live and communicate. Our products empower people to express themselves, live in the moment, learn about the world, and have fun together. Source: Snap, Inc. February 2, 2017 Form S-1 (filed February 2, 2017), https://www.sec.gov/ Archives/edgar/data/ 1564408/000119312517029199/d270216ds1.htm, accessed November 2017. 888 DDExhibit 4 Product Images Profile Stories O Q Chat Q Search 12 Q Stories LL Ghoul J O Q Memories Chat Camera MemoriesExhibit 5 Snap Inc. Income Statements, 2015-2017 (in millions of USD, except per share items) 12 months 12 months 6 months For the fiscal period ending Dec-31-2015 Dec-31-2016 Jun-30-2017 USD Currency USD USD Revenue 58.7 404.5 331.3 Other Revenue Total Revenue 58.7 404.5 331.3 Cost Of Goods Sold 182.3 451.7 315.5 Gross Profit 123.7) (47.2) 15.8 Selling General & Admin Exp. 159.4 289.5 1,617.0 R & D Exp. 82.2 183.7 1,061.6 Depreciation & Amor Other Operating Expense/(Income) Other Operating Exp., Total 241.7 473.2 2,678.6 Operating Income (365.3) (520.4) (2,662.8) Interest Expense (1.4) (1.7) Interest and Invest. Income 1.4 4.7 8.8 Net Interest Exp. 1.4 3.2 7.1 Income/(Loss) from Affiliates (0.5) 3.9 Other Non-Operating Inc. (Exp.) 0.3 (1.0) 1.0 EBT Excl Unusual Items (364.1) 522.1) (2,654.7) Merger & Related Restruct. Charges (16.4) mpairment of Goodwi Gain (Loss) On Sale Of Invest. 0.0 Other Unusual Items EBT Incl. Unusual Items (380.5) (521.7) (2,654.7) Income Tax Expense (7.6) (7.1) (2.8) Earnings from Cont. Ops. 372.9) (514.6) (2,651.9) Earnings of Discontinued Ops. Extraord. Item & Account. Change Net Income to Company (372.9) (514.6) (2,651.9) Minority Int. in Earnings Net Income (372.9) (514.6) (2,651.9) Pref. Dividends and Other Adj. NI to Common Incl Extra Items (372.9) (514.6) (2,651.9) NI to Common Excl Extra Items (372.9) (514.6) (2,651.9) Per Share Items Basic EPS ($0.51) ($0.64) ($2.43)Snap Inc. $ IPV (A) 410-UUD 12 months 12 months 6 months For the fiscal period ending Dec-31-2015 Dec-31-2016 Jun-30-2017 Basic EPS Excl Extra Items (0.51 (0.64) (2.43) Weighted Avg. Basic Shares Out. 732.2 807.9 1,090.8 Diluted EPS ($0.51) ($0.64) ($2.43) Diluted EPS Excl Extra Items (0.51) (0.64) (2.43) Weighted Avg. Diluted Shares Out. 732.2 807.9 1,090.8 Normalized Basic EPS ($0.31) ($0.4) ($1.52) Normalized Diluted EPS (0.31) (0.4) (1.52) Dividends per Share NA NA NA Supplemental Items EBITDA (350.0) (491.3) (2,637.8) EBITA (355.8 (504.2) (2,651.6) EBIT (365.3 (520.4) (2,662.8) EBITDAR (338.7 464.4) 2,613.1) Effective Tax Rate % NM NM NM Current Domestic Taxes 0.0 0.0 Current Foreign Taxes 0.1 0.9 Total Current Taxes 0.1 0.9 Deferred Domestic Taxes (7.7) (7.1) Deferred Foreign Taxes NA (0.8) Total Deferred Taxes (7.7) (8.0) Normalized Net Income (227.6) (326.3) (1,659.2) Filing Date Feb-02-2017 Feb-02-2017 Aug-11-2017 Restatement Type NO Calculation Type REP REP REP Supplemental Operating Expense Items Selling and Marketing Exp. 27.2 124.4 310.6 General and Administrative Exp 132.2 165.2 1,306.4 R&D Exp. 82 2 183.7 1,061.6 Net Rental Exp. 11.3 26.9 24.7 Imputed Oper. Lease Interest Exp. 21. Imputed Oper. Lease Depreciation 5 5 Stock-Based Comp., COGS 0.5 0.5 21.9 Stock-Based Comp., R&D Exp. 10.3 21.9 881.9 Stock-Based Comp., S&M Exp. 3.5 4.0 180.3 Stock-Based Comp., G&A Exp. 59.2 5.4 Stock-Based Comp., Total 1,153.0 73.5 31.8 2,237.1 Currency USD USD USD Exchange Rate 1.0 1.0 Conversion Method 1.0 H HExhibit 6 Snap Inc. Balance Sheets, 2015-2017 Balance Sheet as of Dec-31-2015 Dec-31-2016 Jun-30-2017 (Q2) USD USD USD Currency ASSETS Cash And Equivalents 640.8 150.1 501.7 Short Term Investments 837.2 2,295.9 2,797.6 Total Cash & ST Investments 640.8 987.4 44.3 162.7 171.5 Accounts Receivable 171.5 Total Receivables 44.3 162.7 74 77.8 Prepaid Exp. 30.0 Other Current Assets 3,046.9 Total Current Assets 692.6 1,180.0 Gross Property, Plant & Equipment 50.8 118.4 Accumulated Depreciation (6.7) (17.8) Net Property, Plant & Equipment 44.1 100.6 128.0 Long-term Investments 9.1 11.8 Goodwill 133.9 319.1 502.8 Other Intangibles 43.2 76.0 136.0 Other Long-Term Assets 16.0 35.3 61.7 Total Assets 938.9 1,722.8 3,875.5 LIABILITIES Accounts Payable 0.7 8.4 17.8 Accrued Exp. 10.0 34.6 240. Curr. Income Taxes Payable 1.1 9.3 Other Current Liabilities 144.5 104.5 Total Current Liabilities 156.3 156.7 258.3 Capital Leases 13.5 15.1 15.7 Other Non-Current Liabilities 5.0 32.0 60.6 Total Liabilities 174.8 203.9 334.6 Pref. Stock, Convertible 0.0 0.0 0.0 Total Pref. Equity 0.0 0.0 0.0 Common Stock 0.0 0.0 0.0 Additional Paid In Capital 1,467.4 2,728.8 7,400.8 Retained Earnings (693.2) (1,207.9) (3,863.5) Treasury Stock Comprehensive Inc. and Other (10.0) (2.1) 3.6 Total Common Equity 764.1 1,518.9 3,540.9 Total Equity 764.1 1,518.9 3,540.9 Total Liabilities And Equity 938.9 1,722.8 3,875.5 Supplemental Items Total Shares Out. on Filing Date 753.9 836.1 1,197.2Balance Sheet as of Dec-31-2015 Dec-31-2016 Jun-30-2017 (Q2) Total Shares Out. on Balance Sheet Date 753.9 836.1 1,180.0 Book Value/Share $1.01 $1.82 $3.0 Tangible Book Value 587.0 1,123.8 2,902.1 Tangible Book Value/Share $0.78 $1.34 $2.46 Total Debt 13.5 15.1 15.7 Net Debt (627.3) (972.2) (2, 781.9) Debt Equivalent Oper. Leases 90.4 215.2 Inventory Method NA Avg Cost Land 4.6 4.6 Buildings 5.5 36.9 Machinery 18.4 43.0 Construction in Progress 19.7 20.8 Leasehold Improvements 2.5 13.2 Full Time Employees 600 1,859 Filing Date Feb-02-2017 Feb-02-2017 Aug-11-2017 Restatement Type NC Calculation Type REP REP REP Currency USD USD USD Exchange Rate 1.0 1.0 1.0 Conversion Method H H H Source: Company Balance Sheet, Capital IQ, Inc., a division of Standard & Poor's. Note: For multiple class companies, total share counts are primary equivalent, and for foreign companies listed as primary ADRs, total share counts are ADR-equivalent.12 months 12 months 6 months For the Fiscal Period Ending Dec-31-2015 Dec-31-2016 Jun-30-2017 Currency USD USD USD Net Income (372.9) (514.6) (2,651.9) Depreciation & Amort 5.8 12.9 13.8 Amort. of Goodwill and Intangibles 9.5 16.2 11.2 Depreciation & Amort., Tota 15.3 29.1 25.0 Stock-Based Compensation 73.5 31.8 2,237.1 Other Operating Activities (7.1) (7.1) (3.4) Change in Acc. Receivable 41.9) (118.4) (8.2) Change in Acc. Payable (6.7) 6.5 9.3 Change in Other Net Operating Assets 33.1 (38.5) 27.5 Cash from Ops. (306.6) (611.2) (364.6) Capital Expenditure (19.2) (66.4) (37.4) Cash Acquisitions (48.7) 104.0) (224.2) Divestitures Sale (Purchase) of Intangible assets (9.1) (0.6) (7.7) Invest. in Marketable & Equity Securt. (9.6) (843.3) (1,465.3) Net (Inc.) Dec. in Loans Originated/Sold Other Investing Activities (14.4) (7.0) 9.9 Cash from Investing (100.9) (1,021.3) (1,724.7) Short Term Debt Issued 5.0 Long-Term Debt Issued Total Debt Issued 5.0 Short Term Debt Repaid (5.0) Long-Term Debt Repaid Total Debt Repaid (5.0) Issuance of Common Stock 651.4 1,157.9 2,658.6 Repurchase of Common Stock (1.0) (10.6) (208.4) Total Dividends Paid Special Dividend Paid Other Financing Activities (5.4) (9.4) Cash from Financing 650.4 1,141.9 2,440.8 Net Change in Cash 242.8 (490.7) 351.6 Supplemental Items Cash Interest Paid NA NA NA Cash Taxes Paid 0.0 1.7 5.5 Levered Free Cash Flow NA (472.6) 696.7 Unlevered Free Cash Flow NA 471.7) 597.7 Change in Net Working Capital NA 140.4 (44.9) Net Debt Issued NA NA Filing Date Feb-02-2017 Feb-02-2017 Aug-11-2017An initial public offering, also referred to as going public, was the process through which a privately-held company sold its equity shares to the public for the first time. The shares were then traded in the public markets, or on a stock exchange. Companies usually went public to raise funds in a manner that helped both improve access to capital, and provided greater liquidity for shareholders. 12 The IPO process could take several months to more than a year, and began with the selection of one or more investment banks to lead the process. These banks, known as the lead underwriters, worked closely with the issuing company as it fulfilled legal requirements, including registration with national regulators. In the U.S., this was the Securities and Exchange Commission (SEC). 13 Underwriters also acted as the wholesalers for the shares being sold to the public. To facilitate this process, lead underwriters often created a larger syndicate of banks, distributing the responsibility of selling the shares across its members. The syndicate banks conducted visits to potential investors to promote the company and gauge investor demand. Commonly referred to as the road show, underwriters mainly targeted large institutional investors. Based on the expressions of interest from potential investors and the company's valuation, the lead underwriters and the company determined a proper price for the shares, referred to as the IPO price. The IPO price often represented a discount from the expected share price achieved during the first day of trading.14 All of the shares being offered by the issuer were then bought by the underwriters, typically at a discount of 5% to 7% from the IPO price, and thereafter sold to the subscribing investors at the IPO price. The spread of 5% to 7% represented the investment banks' commission, making an IPO an expensive proposition for the company. Investment banks also helped create a market for the shares by ensuring there was enough liquidity available at the start of trading. Snap's History Evan Spiegel met Robert "Bobby" Murphy and Frank Reginald "Reggie" Brown IV at Stanford University. 15 In 2010, Spiegel and Murphy launched Future Freshman LLC, a platform that aimed to help students and parents navigate the college admissions process. 1 The venture failed to take off, but undeterred the trio launched, Picaboo, a messaging app in 2011, with Spiegel as the chief executive officer (CEO), Murphy as chief technology officer (CTO), and Brown as chief marketing officer (CMO).17 An iOS app, Picaboo allowed users to share self-deleting pictures, controlling how long the pictures would remain visible to the recipient. Brown reportedly came up with the idea of ephemeral pictures and the ghost logo. 18 While Picaboo showed potential, it had only gained 127 active users by the end of summer 2011.19 Tensions soon began to develop among the founding team, particularly regarding the division of equity.20 Brown left the company in August 2011, later filing a lawsuit against Spiegel and Murphy. The case settled in 2014, with Snap paying $157.5 million to Brown.? In fall 2011, upon discovery that a New Hampshire printing company utilized the name Picaboo, Murphy and Spiegel changed the app's name to Snapchat, but continued to utilize the signature ghost logo.22 Snapchat grew exponentially, reaching 1,000 DAU by the end of 2011, and 100,000 DAU in 2012.2312 months 12 months 6 months For the Fiscal Period Ending Dec-31-2015 Dec-31-2016 Jun-30-2017 Restatement Type NC O Calculation Type REP REP REP Currency USD USD USD Exchange Rate 1.0 1.0 1.0 Conversion Method H Source: Company cash flow statements, Capital IQ, Inc., a division of Standard & Poor's. Exhibit 8 Snap Inc. Quarterly Average Daily Active Users QUARTERLY AVERAGE DAILY Global ACTIVE USERS 160 (IN MILLIONS) 160 158 153 143 140 122 120 107 100 80 57 60 40 20 01 74 02 74 23 74 02 75 23 75 94 73 Q1 76 472% 225% 02 76 142% 104% 03 76 73% 04 76 51% 52%% 50%% 53% 65% 62%% 459% Source: Snap, Inc. February 2, 2017 Form S-1 (filed February 2, 2017), p. 64, https://www.sec.gov/ Archives/ edgar/ data/1564408/000119312517029199/ d270216ds1.htm, accessed November 2017. 868 DBExhibit 9 Snap Inc. Quarterly Average DAU by Region North America 68 65 35 30 32 26 14 14 15 15 15 03 16 16 204% 152% 83% 85% 43% 32% 41% 39% 43% 54% 47% 40% Europe 60 52 49 50 46 38 40 34 130 30 27 23 20 18 20 14 10 21 02 03 04 01 02 14 23 04 01 02 '14 '14 '14 '15 15 15 '16 '16 '16 '16 1345367% 302% 136% 85% 37% 51% 47% 47% 80% 85% 53% Rest of World 45 40 39 36 35 30 24 25 20 16 18 15 13 11 10 5 01 '1402 '1403 '1494 '1401 '1592 '1593 '1594 '1591 '1602 '1603 '1604 '16 1010% 411% 280% 330% 182% 107% 87% 82% 83% 99% 88% 58% Source: Snap, Inc. February 2, 2017 Form S-1 (filed February 2, 2017), p. 64, https://www.sec.gov/ Archives/edgar/ data/1564408/000119312517029199/d270216ds1.htm, accessed November 2017.Snap Inc.'s IPO (A) 218-006 Exhibit 10a Key Statistics: Snap Inc. vs. Key Competitors, March 1, 2017 (dollars in millions) Google LinkedIn Facebook Twitter Snap Market Capitalization (latest) $584,911 NA $397,141 $11,313 Enterprise Value (latest) $502,513 NA $367,692 $9,225 Revenue (LTM) $90.272 $3,615 $27,638 $2,530 $405 EBITDA (LTM) $29,816 $477 $14,769 $62 ($491) Total Enterprise Value / Revenue 5.6x NA 13.3x 3.6x Total Enterprise Value / EBITDA 16.8x NA 24.8x 149.6x EBITDA Margin (LTM) 33.03% 13.21% 53.44% 2.44% -121.46% Net Income Margin (LTM) 21.58% 4.56% 36.97% -18.06% -127.24% Revenue Growth - 1 year 20.38% 30.39% 54.16% 14.05% 589.50% EBITDA Growth - 1 year 22.28% 138.17% 80.77% 0.00% 0.00% Total Debt / Capitalization 2.75% 19.16% 0.00% 26.81% 0.99% 5 Year Beta 0.97 0.69 1.05 Source: Company Comp Set, Capital IQ, Inc., a division of Standard & Poor's, accessed February 2018. Exhibit 10b Comparable Companies, March 27, 2017 (dollars in millions, except share price) High Growth Comparables Alibaba Google Facebook Line Tencent Twitter Mean Median Ticker BABA GOOGL FB 3938 JP ICTZF TWTR Price as of March 24, 2017 $108 04 $835.14 $140 34 14.090.00 $29.05 $15 14 Market Capitalization $277,771 $583,516 $410,495 $8.853 $294,304 $10,825 Current Enterprise Value $256.260 $486,004 $374.095 $7.438 $228,949 58,712 Enterprise Value / Revenue Exp. 2017 9.3x 5.61 9.6x 4 91 8.Ox 3.6x 6.9x 7.1x Enterprise Value / Revenue Exp. 2018 7 0x 4.5x 7 0x 8 8x 3.4x 5.5x 57 x Source: J.P. Morgan, "Snap Inc.: Strong Engagement & Monetization Headroom; But Still Much to Prove at Current Valuation; Initiating Neutral & $24 PT," March 27, 2017, via Capital IQ, accessed November 2017. So F9 W #t A 5 6 7 8 O O E R O PUS IPO Activity $140 275 $120 227 217 213 192 196 170 153 160 $100 125 595. 105 $80 31 354.9 $60 518.9 $43.1 3427 $38.7 $40 $33.7 $363 $35.5 $30.0 524.5 $21.9 $18.8 $20 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Proceeds ($ Billions) +Number of IPOs Source: "U.S. IPO Market, 2017 Annual Review," Renaissance Capital, January 2, 2018, http://www.renaissancecapital.com/review/2017USReview.pdf?inf_contact_key=4cba20ba8a76c74accaecc47c6db9 998d3f0e503f107744851ded45cef097a76, accessed February 2018. Note: Data set includes IPOs with a market cap above $50 million, and excludes closed-end funds, unit offerings and SPACs. Proceeds totals do not include the exercise of underwriter over-allotments Exhibit 11b Annual IPO Proceeds Fall to Lowest Level Since 2003 IPO Volume 2009 2010 2011 2012 2013 2014 2015 2016 Number of deals 63 154 124 128 222 275 170 105 Proceeds raised 21.9 38.7 35.5 2.6 54.9 85.3 30.0 18.8 U.S. billions Median deal size 155 108 160 124 126 100 94 95 (U.S. millions) PE-backed deals 22 35 45 68 71 39 30 PE-backed proceeds 6.5 9.6 20.4 0.3 24.5 25.0 11.3 8.8 (U.S. billions) VC-backed deals 12 61 51 46 82 126 85 42 VC-backed proceeds 13 6.0 7.9 20.7 9.7 35.3 8 9 3.5 (U.S. billions) Source: "U.S. IPO Market, 2016 Annual Review," Renaissance Capital, December 16, 2016, http://www.renaissancecapital.com/review/2016usreview.pdf, accessed November 2017. 688 DD DII DD FS Fa FBExhibit 11c Mega-Tech Companies in the Private Pipeline Business Estimated Valuation Company Funding $68,000 Uber Smartphone app for on-demand $13, 100 transportation service Snap Mobile app for ephemeral messaging $3,000 $25,000 and photo sharing Palantir Government and financial data analytics $2,440 $20, 150 platform Pinterest Pinboard-style social photo sharing $1,320 $11,000 website Dropbox Web-based cloud storage provider $607 $10,000 Spotify Subscription-based music streaming $1, 176 $8,530 service Airbnb Provides a global network of $3,000 $30,000 accommodations offered by locals WeWork Outfits and leases shared office space, $1,690 $16,900 primarily for startups SoFi Peer-to-peer lending platform for $1,420 $4,000 student loan financing Source: " U.S. Market, 2016 Annual Review," Renaissance Capital, December 16, 2016, http:/ /www.renaissancecapital.com/review/2016usreview.pdf, accessed November 2017. Note: Funding and estimated valuation figures are in millions of U.S. dollars. W # 00 * Q W E R T Y S D F K X B M command command optionExhibit 12a Total and Mobile Advertising Spend (in billions of USD), Top 10 Advertising Markets Total Advertising Spend Mobile Advertising Spend Country 2016 2020 2016 2020 U.S. 254.8 291.4 32.4 88.8 China 86.4 109.7 12.0 55.1 Japan 38.8 40.0 2.3 3.6 UK 23.5 26.3 4.1 9.8 Germany 17.9 21.0 1.1 3.0 France 12.3 14.3 0.8 Australia 11.9 14.2 1.4 4.5 Brazil 10.6 12.7 0.2 0.7 Canada 8.5 11.9 1.0 2.9 Italy 8.2 9 4 0 .7 23 Source: Adapted from IDC data in Snap, Inc. February 2, 2017 Form S-1 (filed February 2, 2017), p. 118, https://www.sec.gov/ Archives/edgar/ data/1564408/000119312517029199/d270216ds1.htm (IDC), accessed November 2017. Note: China excludes Hong Kong. Exhibit 12b Mobile Advertising Growth over Time $900 $600 $300 2015 2016 2017 2018 2019 2020 Non-mobile Ad Spend Mobile Ad Spend 868 F7 % D OExhibit 12c Key Players Market Share of the Global Digital Advertising Market, 2016 Google 30.90% Remainder 47.50% Facebook 12% Alibaba Baidu 4.50% 5.10% Source: Aswath Damodaran, "My Snap Story: Valuing Snap ahead of it's IPO!," Blog: Musing on Market, February 17, 2017, http://aswathdamodaran.blogspot.com/2017/02/a-snap-story-valuing-snap-ahead-of-its.html, accessed February 2018 Exhibit 13a Comparable Trading Multiples: Utilizing Year 1 and Year 2 Revenues Post IPO Facebook Year 1 Year 2 Twitter Year 1 Year 2 IPO Date: May 2012 2012 Expected 2013 Expected IPO Date: Nov 2013 2014 Expected 2015 Expected Cover @ $35 17.3x 13.4x Cover @ $20 13.3x 9.6x IPO @ $38 18.8x 14.5x PO @ $26 18.0x 13.0x IPO +1 day 14.6x PO +1 day 32.8x 23.7x IPO + 30 days 16.4x 12.6x PO + 30 days 32.9x 23.8x IPO +90 days 7.5X 5.9x IPO +90 days 40.8x 29.5x IPO +365 days 8.7x 6.9x IPO +365 days 18.4x 11.2x Average since IPO 12.7x 9.6x Average since IPO 13.8x 9.3x Current 9.2x 7.4x Current 4.1x 3.9xExhibit 13b Competitors' Performance Metrics, Post IPO Google Linkedin Facebook Twitter Revenues EBIT Margin Revenues EBIT Margin Revenues EBIT Margin Revenues EBIT Margin IPO Year $3.169 3853 26.92% $522 $26 4.98% $5,089 $538 10.57% $665 ($636) -95.64% $6,139 $2,107 34.32% $972 $57 5.86% $7,872 $2,921 37.11% $1,403 ($539) 9) -38.42% $10,605 $3,550 33.47% $1,529 $48 3.14% $12.466 $4,994 40.06% $2.218 ($450) -20.29% 3 $16,594 $5,084 3 30.64% $2.219 $36 1.62% $17.928 $6.225 34.72% $2.530 ($266) -10.51% 4 $21,796 $6.632 30.43% $2.991 ($122) -4.08% $27,638 $12.493 45.20% 5 $23,651 $8,312 35.14%% 6 $29,321 $10,381 35.40% 7 $37,905 $12.242 32.30% $46,039 $13,843 30.07% 9 $55,519 $15.403 27.74% 10 $66,001 $16,874 25.57% CAGR Years 1-3 73.65% 61.99% 52.16% 56.11% Year 31.35% 34.79% 54.16% Years 5-10 24.81% NA NA Source: Aswath Damodaran, "My Snap Story: Valuing Snap ahead of it's IPO!," Blog: Musing on Market, February 17, 2017, http://aswathdamodaran.blogspot.com/2017/02/a-snap-story-valuing-snap-ahead-of-its.html, accessed February 2018. Exhibit 14 Price-to-Sales Ratio at Time of IPO (selected technology companies) Microsoft, 3.7 Yelp, 10.7 Tesla, 14.3 Google, 16 Amazon, 19.1 Alibaba, 19.8 Facebook, 28 Twitter, 44.8 10 20 30 40 50 Source: Adapted from Bloomberg and SEC filings cited in Jen Wieczner, "The Snapchat IPO Just Got a Lot Cheaper," Fortune, February 16, 2017, http:/ /fortune.com/2017/02/16/snapchat-ipo-snap-stock-price/, accessed November 2017.Exhibit 15 Key Statistics: Snap Inc. vs. Competitors, at Respective IPO Dates ($ in millions) Google Linkedin Facebook Twitter Snap IPO Date 19-Aug-2004 19-May-2011 18-May-2012 7-Nov-2013 NA Revenues $1,466 5243 53.711 $317 $404 Operating Income $342 $20 $1,756 ($77) ($522) Net Income $106 $15 $1.000 $79) ($515) Number of Daily Active Users NA NA 526 100 158 User Minutes Per Day (January 2017) NA 50 25 Market Capitalization on Offering Date $23,000 $9,000 $81,000 $18,000 TBD Source: Adapted from Aswath Damodaran, "My Snap Story: Valuing Snap ahead of it's IPO!," Blog Musing on Market, February 17, 2017, http://aswathdamodaran.blogspot.com/2017/02/a-snap-story-valuing-snap-ahead-of-its.html, accessed February 2018, and Google Inc., August 18, 2004, Final Prospectus, (filed August 18, 2004), https://www.sec.gov/Archives/edgar/ data/1288776/000119312504143377/d424b4.htm#toc59330_11; LinkedIn Corporation, Prospectus, (filed May 19, 2011), https://www.sec.gov/Archives/edgar/data/1271024/ 0001 19312511145240/d424b4.htm; Facebook Inc., Prospectus, (filed May 18, 2012), https://www.sec.gov/Archives/ edgar/ data/ 1326801/000119312512240111/ d287954d424b4.htm; Twitter Inc., Prospectus, (filed November 7, 2013), https://www.sec.gov/Archives/edgar/data/1418091/000119312513431301/d564001d424b4.htm#toc564001_11; and Snap Inc., February 2, 2017 Form S-1 (filed February 2, 2017), https://www.sec.gov/Archives/edgar/data/1564408/ 000119312517029199/d270216ds1.htm, all accessed February 2018. Note The Daily Active User data is for the most recent time period reported in each company's respective prospectus. The financial data is from the reported results for the most recent fiscal year end prior to each company's respective IPO date: Google for the year ended December 31, 2003; LinkedIn December 31, 2010; Facebook December 31, 2011; Twitter December 31, 2012; and Snap December 31, 2016. Exhibit 16a Snap Inc. Quarterly Average Revenue Per User (ARPU) $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 Global North America Europe Rest of World Q1 2016 Q2 2016 Q3 2016 04 2016 Q1 2017 Source: Adapted from Facebook company documents cited in Alexei Oreskovic, "Look at the Big Gap Between Snapchat's Revenue Per User and Facebook's," Business Insider, http://www.businessinsider.com/snapchat-arpu-versus- facebook-arpu-charts-2017-5, accessed November 2017. Note: Figures are unaudited. North America includes Mexico and the Caribbean. Europe includes Russia and Turkey. ARPU is defined as quarterly revenue divided by the average DAU.Exhibit 16b Facebook Quarterly Average Revenue Per User (ARPU) $20.00 $18.00 $16.00 $14.00 $12.00 $10.00 $8.00 $6.00 $4.00 $2.00 $0.00 Global U.S. & Canada Europe Asia-Pacific Rest of World Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Source: Adapted from Facebook company documents cited in Alexei Oreskovic, "Look at the Big Gap Between Snapchat's Revenue Per User and Facebook's," Business Insider, http://www.businessinsider.com/snapchat-arpu-versus- facebook-arpu-charts-2017-5, accessed November 2017. Exhibit 17 Comparison of Major Tech Companies at Time of IPO Quarter-over- Company Active Users Quarter Date Growth Facebook (Daily) 526 8.9% Mar-12 Twitter (Montly) 232 6.4% Sep-13 Snap (Daily) 158 3.3% Dec-16 Source: Adapted from Don Dion, "Beware of the Snap IPO: We Fear Its Value Could Disappear As Quickly As Its Messages," Seeking Alpha, March 1, 2017, https://seekingalpha.com/ article/4050941-beware-snap-ipo-fear-value-disappear- quickly-messages, accessed November 2017 and Facebook Inc., Prospectus, (filed May 18, 2012): Twitter Inc., Prospectus, (filed November 7, 2013); Snap Inc., February 2, 2017 Form S-1 (filed February 2, 2017), all accessed February 2018. 888 FA Dil % 4 5 OSnapchat's early success soon attracted investors, with Snapchat receiving a $485,000 investment from Lightspeed Venture Partners in May 2012.24 Spiegel decided to drop out of Stanford to focus on the project. Lightspeed's investment allowed Snapchat to launch on Android and to add new features, including video support. 25 Competitors began to take notice. Mark Zuckerberg, CEO of Facebook, reportedly met with Snapchat's founding team in 2012. Shortly after the meeting, Facebook launched a very similar app, Poke. 26 The increased competition failed to curtail Snapchat's growth. In February 2013, Snapchat raised an additional $13.5 million in Series A financing, led by Benchmark Capital, giving the company a valuation between $60 and $70 million. Snapchat's user base continued to grow, with users sharing 150 million images per day by April 2013.28 Without any developed revenue streams, questions over Snapchat's long-term viability began to arise. However, Snapchat continued to attract investors, raising an additional $80 million in a Series B round at a valuation of $800 million in June 2013.2This also coincided with a $20 million secondary offering, allowing Spiegel and Murphy to cash in on the venture's early success, 30 Total daily snaps, or self-deleting images, now reached 200 million.31 Snapchat again expanded its functionality, launching the Story function that same year, which allowed users to share a collection of videos and photos, 32 Snapchat's user base continued to rapidly increase, particularly among teenagers and young adults. By September 2013, 350 million photos were shared daily.3 Facebook reportedly tried to acquire Snapchat, offering nearly $3 billion in cash that November." Spiegel rejected the offer even though Snapchat remained unprofitable, still lacking any revenue sources.35 Instead, Snapchat raised an additional $50 million in a Series C round of funding, on a valuation of approximately $2 billion in December 2013.36 This funding coincided with the launch of a Smart Filter feature, giving Snapchat users the capability to indicate time and temperature, as well as other variables, and the introduction of the ability to replay snaps. 37 In late 2013, security concerns around the app began to arise. Snapchat suffered a hack that exposed 4.6 million usernames and numbers in December 2013." A few weeks later, researchers discovered vulnerabilities that would allow hackers to freeze phones by sending many snaps.39 Finally, Snapchat settled a lawsuit brought by the Federal Trade Commission (FTC), in which it was alleged that Snapchat had deceived users regarding the permanent deletion of photos and videos, since media could be saved using third-party applications without the sender's knowledge.40 In early 2014, Snapchat surpassed 50 million DAU. That June, Snapchat launched Our Story, which allowed users to add their snaps to an events story, in addition to adding the snaps to the users personal story. For the first time, anyone attending or associated with an event could add snaps directly to the event's stream." In November 2014, Snapchat introduced ads, and the first sponsored Our Story collaborative live stream feature launched. Samsung paid an undisclosed amount to include Samsung pictures and videos between the media uploaded by users attending the 2014 American Music Awards, the first demonstration of how Snapchat planned to monetize its platform." This excitement was translated into another funding round, raising $485 million from 23 investors in a Series D round, with valuation reports ranging from $10 billion to up to $20 billion. 43 Snapchat began to look externally for additional capabilities. It purchased Vergence Labs in March 2015, a company that developed smart glasses (called Epiphany Eyewear by Vergence), which were camera glasses that could record video." It also acquired AddLive in May 2015 in order to power Snapchat's video chat feature." Soon after, Snapchat launched text and video chat features. 46 In 2015, Snapchat surpassed 100 million DAU and introduced features called Geofilters, Lenses and Discover, the latter being a channel guide serving media content alongside brand advertisements Partners in the project included National Geographic, Yahoo News, and ESPN." Snapchat also DDExhibit 18a Executive Officers and Directors, Snap, Inc. The following table sets forth information for our directors and executive officers, and their ages as of December 31, 2016. Name Age Position Executive Officers: Evan Spiegel 26 Co-Founder, Chief Executive Officer, and Director Robert Murphy 28 Co-Founder, Chief Technology Officer, and Director Imran Khan 39 Chief Strategy Officer Andrew Vollero 50 Chief Financial Officer Chris Handman 44 General Counsel Timothy Sehn 36 Senior Vice President of Engineering Steven Horowitz 49 Vice President of Engineering Non-Employee Directors: Michael Lyntona b 57 Director and Chairman of the Board Joanna Colesb 54 Director A.G. Lafleya b 69 Director Mitchell Lasky 54 Director Stanley Meresman 70 Director Scott D. Millera c 64 Director Christopher Young 44 Director Source: Snap, Inc., February 2, 2017 Form S-1 (filed February 2, 2017), p. 125, https://www.sec.gov/ Archives/edgar/ data/1564408/000119312517029199/ d270216ds1.htm, accessed November 2017. Member of the compensation committee. Member of the nominating and corporate governance committee. Member of the audit committee. So 868 W# 6 W R PExhibit 18b Biographies of Snap, Inc.'s Leadership Executive Officers Evan Spiegel Mr. Spiegel is our co-founder and has served as our Chief Executive Officer and a member of our board of directors since May 2012. We believe that Mr. Spiegel is qualified to serve as a member of our board based on the perspective and experience he brings as our co-founder and Chief Executive Officer. Robert Murphy Mr. Murphy is our co-founder and has served as our Chief Technology Officer and a member of our board of directors since May 2012. Mr. Murphy holds a B.S. in Mathematical and Computational Science from Stanford University. We believe that Mr. Murphy is qualified to serve as a member of our board of directors based on the perspective and experience he brings as our co-founder and Chief Technology Officer. Imran Khan Mr. Khan has served as our Chief Strategy Officer since January 2015. From May 2011 to January 2015, Mr. Khan served as a Managing Director in the Investment Banking Division at Credit Suisse. From March 2004 to May 2011, Mr. Khan was an Equity Analyst at J.P. Morgan Securities Inc. Mr. Khan holds a B.S.B.A. in Finance and Economics from the University of Denver. Andrew Vollero Mr. Vollero has served as our Chief Financial Officer since February 2016 and previously served as our Vice President, Finance since August 2015. From September 2000 to August 2015, Mr. Vollero was employed at Mattel, Inc., a toy manufacturing company, where he served as the Senior Vice President, Corporate Strategy, Development & Investor Relations from September 2005 to August 2015 and Division CFO, Senior Vice President, Finance and Strategy from September 2000 to September 2005. Mr. Vollero holds a B.A. in Mathematics and Economics from Yale University and a Master of Science in Management from Oxford University. Chris Handman Mr. Handman has served as our General Counsel since May 2014. From March 2000 to April 2014, Mr. Handman was a partner in the Supreme Court and Appellate Litigation group at Hogan Lovells LLP in Washington, D.C. Earlier in his career, Mr. Handman served as a law clerk for Judge Patricia M. Wald of the U.S. Court of Appeals for the D.C. Circuit and Judge Colleen Kollar- Kotelly of the U.S. District Court for the District of Columbia. Mr. Handman holds a J.D. from Yale Law School and a B.A. in both Political Science and International Relations from American University. Timothy Sehn Mr. Sehn has served as our Senior Vice President of Engineering since September 2013. Prior to joining Snap Inc., Mr. Sehn was employed at Amazon.com, Inc., an e-commerce company, from September 2003 to September 2010, where he held various positions, including as Director of Software Development from September 2010 to September 2013. Mr. Sehn holds a B.A.Sc. from the University of Waterloo. Steven Horowitz Mr. Horowitz has served as our Vice President of Engineering since January 2015. Prior to joining Snap Inc., Mr. Horowitz served as Senior Vice President of Software Engineering at Motorola Mobility, LLC, formerly a Google company, from December 2012 through January 2015. From January 2009 through November 2012, Mr. Horowitz served as Chief Technology Officer for Quotient Technology, Inc., a consumer technologies company. Prior to that he worked at Google, Microsoft, and Apple. Mr. Horowitz holds a B.A. from the University of Michigan, Ann Arbor. Mr. Horowitz is also a member of the board of directors of Quotient Technology, Inc. F7 F9Non-Employee Directors Michael Lynton Mr. Lynton has served on our board of directors since April 2013 and has been Chairman of our board of directors since September 2016. Mr. Lynton served as Chief Executive Officer of Sony Entertainment Inc., an international entertainment company, from April 2012 until February 2017, and has served as Chairman and Chief Executive Officer of Sony Pictures Entertainment since January 2004. Mr. Lynton has also served as a member of the board of directors of Ares Management, L.P. since 2014. Mr. Lynton holds a B.A. in History and Literature from Harvard College and an M.B.A from Harvard Business School. We believe that Mr. Lynton is qualified to serve as a member of our board of directors and Chairman due to his extensive leadership experience. Joanna Coles Ms. Coles has served on our board of directors since December 2015. Ms. Coles was appointed Chief Content Officer of Hearst Magazines in September 2016, overseeing editorial for Hearst's 300 titles globally. Prior to that she was Editor-in-Chief of Cosmopolitan, a role she started in September 2012. She edited Marie Claire magazine from April 2006 to September 2012. Ms. Coles worked for The Times of London from September 1998 to September 2001 and served as New York Bureau Chief for The Guardian from 1997 to 1998. She is on the board of Women Entrepreneurs New York City, an initiative to encourage female entrepreneurship, with a focus on underserved communities. Ms. Coles holds a B.A. in English and American literature from the University of East Anglia. We believe that Ms. Coles is qualified to serve as a member of our board of directors due to her extensive experience working with content providers and advertisers. A.G. Lafley Mr. Lafley has served on our board of directors since July 2016. Mr. Lafley has held various positions within The Procter & Gamble Company since 1977 and served as its President, Chief Executive Officer, and as a member of the board of directors from June 2000 until June 2009 and again from May 2013 to June 2016. He also served as Chairman of the Board from July 2002 to January 2010. From April 2010 to May 2013, Mr. Lafley served as a consultant and as a Senior Adviser at Clayton, Dubilier & Rice, LLC, a private equity firm. Mr. Lafley holds an A.B. from Hamilton College and an M.B.A. from Harvard Business School. We believe that Mr. Lafley is qualified to serve as a member of our board of directors due to his extensive leadership experience. Mitchell Lasky Mr. Lasky has served on our board of directors since December 2012. Mr. Lasky has been a partner at Benchmark, a venture capital firm, since April 2007. From November 2000 to February 2006, Mr. Lasky served as Chief Executive Officer of JAMDAT Mobile, Inc., a publicly traded mobile games company, and served as Executive Vice President, Mobile & Online at Electronic Arts, a video game company, after it acquired JAMDAT in February 2006, until April 2007. Mr. Lasky holds a B.A. in History and Literature from Harvard College and a J.D. from the University of Virginia School of Law. We believe Mr. Lasky is qualified to serve as a member of our board of directors due to his extensive experience with social media and technology companies, as well as his experience as a venture capitalist investing in technology companies. Stanley Meresman Mr. Meresman has served on our board of directors since July 2015. During the last ten years, Mr. Meresman has served on the boards of directors of various public and private companies, including service as chair of the audit committee for some of these companies. He currently serves on the board of directors, and as chair of the audit committee, of Palo Alto Networks, Inc. He served as a member of the board of directors of LinkedIn Corporation from October 2010 to December 2016, Zynga Inc. from June 2011 to June 2015, Meru Networks, Inc. from September 2010 to May 2013, and Riverbed Technologies, Inc. from March 2005 to May 2012. From January 2004 to December 2004, Mr. Meresman was a Venture Partner with Technology Crossover Ventures, a private equity firm, and was General Partner and Chief Operating Officer of Technology Crossover Ventures from November 30 868 Fa F9 $ % &2001 to December 2003. During the four years before joining Technology Crossover Ventures, Mr. Meresman was a private investor and board member and advisor to several technology companies. From 1989 to 1997, Mr. Meresman served as the Senior Vice President and Chief Financial Officer of Silicon Graphics, Inc. Mr. Meresman holds a B.S. in Industrial Engineering and Operations Research from the University of California, Berkeley and an M.B.A. from the Stanford Graduate School of Business. We believe that Mr. Meresman is qualified to serve as a member of our board of directors and chair of our audit committee due to his background as a member of the board and chair of the audit committee of other public companies and his financial and accounting expertise from his prior extensive experience as chief financial officer of two publicly traded companies. Scott D. Miller Mr. Miller has served on our board of directors since October 2016. Mr. Miller is a founder and Chief Executive Officer of G100 Companies, which operates G100 Network and SSA & Company. Before joining G100 Companies in March 2004, Mr. Miller was employed at Hyatt Hotels Corporation, a global hospitality company, where he served as non-executive vice chairman from August 2003 to December 2004, president from January 1999 to August 2003, and executive vice president from September 1997 to July 2003. Mr. Miller currently serves on the board of directors of QTS Realty Trust, Inc. and served on the boards of Affinion Group, Inc. from 2011 to 2013, AXA Equitable Life Insurance Company from 2002 to 2012, Orbitz Worldwide, Inc. from 2003 to 2004, and NAVTEQ corporation from 2002 to 2006. He also serves on several private company boards. Mr. Miller holds a B.S. in Human Biology from Stanford University and an M.B.A. from the University of Chicago. We believe that Mr. Miller is qualified to serve as a member of our board of directors due to his extensive leadership experience. Christopher Young Mr. Young has served on our board of directors since October 2016. Since October 2014, Mr. Young has served as Senior Vice President and General Manager, Intel Security Group at Intel Corporation, a multinational technology company. From November 2011 to September 2014, Mr. Young served as Senior Vice President, Security & Government Group at Cisco Systems, Inc. a technology networking company. From August 2010 to October 2011, Mr. Young served as Senior Vice President & General Manager, End User Computing at VMware, Inc., a software company. From January 2011 to August 2016, Mr. Young served on the board of directors of Rapid7, Inc., a security software company. Mr. Young holds a B.A. in Public Policy from Princeton University and an M.B.A. from Harvard Business School. We believe that Mr. Young is qualified to serve as a member of our board of directors due to his extensive experience with technology companies. There are no family relationships among any of the directors or executive officers. Source: Snap, Inc., February 2, 2017 Form S-1 (filed February 2, 2017), p. 125-127, https://www.sec.gov/ Archives/ edgar/ data/1564408/000119312517029199/ d270216ds1.htm, accessed November 2017. F3 868 DII DD FOreportedly raised $200 million in early 2015, at a valuation of $16 billion. " Snap again used the proceeds to upgrade the app, adding: Geofilters, which gave users the ability to design and brand a "creative overlays" that told others where or what the user was doing; a Memories feature, which let users save their Snaps and Stories; and the integration of Bitmojis, or personalized cartoon avatars, after Snap acquired Bitstrips Inc. for approximately $100 million.49 In May 2016, the company closed a Series F round, raising a reported $1.8 billion at a valuation of approximately $20 billion.50 That September, Snapchat introduced Spectacles-video capturing sunglasses-its first hardware product. At the same time, Snapchat announced that the company would be rebranding and renaming itself as simply Snap Inc.51 According to Snap's chief strategy officer, Imran Khan, "We rebranded our company to Snap Inc. because we are bigger than just one app . . . Snap Inc. is a camera company - we believe that reinventing the camera represents our greatest opportunity to improve the way people live and communicate."52 For a timeline of Snap's history and pre-IPO funding rounds, see Exhibit 1 and Exhibit 2. The Snap IPO53 In October 2016, rumors about a potential Snap IPO began to surface. Analysts indicated that the company looked to raise approximately $3 billion, and provided wide estimates for its potential valuation, ranging from $25 billion to $35 billion, with some predicting as much as $40 billion.4 In February 2017, Snap announced its intention to pursue an IPO, filing the requisite documents with the SEC. With Goldman Sachs and Morgan Stanley as its lead underwriters, Snap looked to sell 145 million Class A shares at a target price of $14 to $16 per share. Existing shareholders planned to offer an additional 55 million Class A shares. After the offering, Snap would have a total of 1.157 billion shares outstanding. Snapchat also gave the underwriters the right to offer up to an additional 30 million shares in a greenshoe provision- a clause that allowed underwriters to buy up to an additional 15% of a company's shares at the offering price if demand exceeded expectations. 56 The company expected to receive approximately $2.1 billions in net proceeds from the offering after subtraction of commissions and expenses. The offering aimed to give Snap greater liquidity and a public market for its Class A stock. According to Snap's S-1 filing, the net proceeds would be mainly used for "general corporate purposes, such as working capital, operating expenses, and capital expenditures. We may also use a portion of the net proceeds to acquire complimentary businesses, products, services, or technologies."57 Products58 Snap branded itself as a camera company, but the Snapchat app remained its core product (Exhibits 3 and Exhibit 4). The camera application enabled users to communicate through short videos and pictures, which deleted automatically and were referred to as snaps. As of the time of Snap's S-1 filing, 158 million DAU were creating an average of 2.5 billion daily snaps. Users could also personalize their Snaps using multiple tools such as Lenses, Geofilters, and Bitmojis. Lenses were interactive animationsthat were superimposed on a snap. Geofilters could be overlaid on snaps at specific locations. Bitmojis were cartoon avatars of users, created in the Bitmoji application. The app also included a Chat Service that enabled users to interact with each other through text- based chats, group chats, video calls, voice calls, stickers, and Bitmojis. On average, more than 60% of DAU used the Chat Service every day, visiting Snapchat more than 18 times each day. The app also provided a Storytelling Platform which enabled users to create collections of Snaps that played in chronological order and self-deleted within 24 hours. Snapchat enabled the creation of different types of stories, including My Story for each individual user; Live Stories, created by the community; and Publisher Stories, created by Snapchat's publisher partners. On average, more than 25% of DAU posted to their Story every day. A Memories function enabled users to save their Snaps in a personal collection. To complement the app, Snap offered Publisher Tools, content tools that allowed partners to build, edit, and publish Snaps and attachments based their specific content. In this way, publishers and advertisers had a touchpoint with DAUs. Snap also commercialized Spectacles, which were camera- enabled sunglasses that connected seamlessly with Snapchat and enabled users to create Snaps from a human perspective. Revenue Generation59 The prospectus highlighted two main advertising products-Sponsored Creative Tools and Snap Ads with Attachments-that allowed Snap to generate revenue. Sponsored Creative Tools, included Sponsored Lenses and Sponsored Geofilters that users could access when editing their Snaps or view by watching friends' Snaps that utilized this content. The Snap Ads (video advertisements) played in the Stories feature. According to Snap, approximately 60% of the ads were viewed with the audio on Viewers could also engage with the ad through interactive attachments without leaving the Snapchat application. Snap developed an advertising delivery framework to optimize the relevance of advertisement impressions. The company also incorporated multiple proprietary and third-party tools to measure advertisement effectiveness. As the fastest growing advertising segment, mobile advertising presented a significant revenue opportunity. In 2016, mobile advertising accounted for $66 billion, or 10% of the $652 billion in worldwide advertising spend. By 2020, mobile advertising was projected to increase to $196 billion, or 25% of the expected $767 billion in worldwide advertising spend. Growth of the mobile advertising segment would likely come at the expense of television and desktop computers, whose users were expected to shift toward mobile technologies. The U.S. was expected to remain the main market, accounting for 49% mobile advertising spend in 2016. Financial Performance Available financial information was limited to the two years prior to Snap's filing. The data showed that while Snap's revenues were growing rapidly, the company had not yet managed to turn a profit. For fiscal year 2016, Snap posted a net loss of $514.6 million on revenues of $404.5 million. (For company financials, see Exhibit 5, Exhibit 6, and Exhibit 7.) The company had 158 million DAU across three global regions: North America (43%), Europe (33%), and Rest of the World (24%), with quarterly average revenue per user (ARPU) reaching $1.05 in the fourth quarter of 2016. Despite its initial rapid acceptance, growth in total DAU appeared to be slowing.60 (For growth in quarterly DAU, see Exhibit 8; for DAU growth by region, see Exhibit 9.)Capital Structure Snap outlined its three classes of common stock (A, B, and C). On the topic of voting power for each, the prospectus read: Holders of our Class A common stock-the only class of stock being sold in this offering - are entitled to no vote on matters submitted to our stockholders. Holders of our Class B common stock are entitled to one vote per share. And holders of Class C common stock are entitled to ten votes per share. Holders of shares of Class B common stock and Class C common stock will vote together as a single class on all matters (including the election of directors) submitted to a vote of stockholders. 61 While publicly traded classes of non-voting stock were common in other U.S. companies, this offering would represent the first time a company attempted an IPO comprised entirely of non-voting stock. Moreover, given the expected resulting shareholder structure, Spiegel and Murphy would effectively retain full control of the company: [They] will be able to exercise voting rights with respect to an aggregate of 215,887,848 shares of Class C common stock, which will represent approximately 88.5% of the voting power [. . .]. As a result, Mr. Spiegel and Mr. Murphy, and potentially either one of them alone, have the ability to control the outcome of all matters submitted to our stockholders for approval, including the election, removal, and replacement of directors and any merger, consolidation, or sale of all or substantially all of our assets. 62 Furthermore, Spiegel and Murphy would theoretically be able to continue exercising their influence through voting power even in the case of termination of their employment. Investors were expected to gain returns only through share price appreciation, since thus far Snap had never paid a cash dividend and indicated it would not start doing so after going public as it intended to retain future earnings to finance operations and expansions. Snap also indicated that lock- up periods of 150 days after the prospectus date were in place for the holders of the remaining outstanding shares. 63 Competitive Landscape64 Snap faced significant competition both in the U.S. and overseas. Perhaps its strongest and most worrisome competitors were Facebook and Twitter. Like Snap, both of these U.S. based platforms generated the majority of their revenues via advertising. 65 As of December 2016, Facebook, achieved 1.23 billion DAU. Facebook generated nearly $27 billion in annual revenues in 2016, mostly from advertising. Mobile advertising represented nearly 85% of all its advertising revenues. Facebook also controlled Instagram, the biggest direct challenger to Snapchat. Instagram ran a mobile-based social network that was gradually developing several functions very similar to those of Snapchat. For example, in August 2016, Instagram launched Stories, a feature that enabled users to post disappearing picture and video-based stories in a manner very similar to Snapchat's My Story. By January 2017, the Stories feature had 150 million DAU and was on track to surpass Snapchat before the end of the year. Stories was not the only function similar to Snapchat in the Instagram platform, which also included filters to personalize pictures and videos. 69Twitter's platform also enabled that enabled real-time interaction. The network was often used to share news and opinions, potentially challenging Snapchat's Discover function. For data on how Snap compared to Facebook, Twitter and other key competitors immediately prior to Snap's IPO see Exhibit 10a. Although most often compared to Facebook and Twitter, Snap also competed against several other high growth advertising platforms. For example, Google's YouTube challenged Snapchat's video sharing functions. Competitors to Snapchat's chat function were vast, to include: Whatsapp (controlled by Facebook), Apple's Messages, and Facebook Message in the U.S. Worldwide, competitors included Line, and Tencent's WeChat, which had more than 700 million monthly active users.70 For data on other competitors and other high growth comparables, see Exhibit 10b. Key Risks Snap faced several challenges. First, potential competition from other players in the market could affect Snap's ability to grow its consumer base, and its growth rate had already begun to slow down. Additionally, the majority of snap users were between the ages of 18-34," with the most active users being under the age of 25. A lack of brand or app loyalty by users in these demographics could hinder Snap's ability to grow as well as maintain its user base. Finally, Snap derived substantially all of its revenue from third party advertising. However, Snap lacked any long-term advertising commitments, which meant that Snap needed to continue to find ways to attract, maintain and increase the average advertiser spend. 72 Snap also depended on Google Cloud. Google provided an internet-based computing service, with networked remote servers for data storage, processing, and online access, commonly referred to as a cloud computing service. 7 Snap ran most of its computing on Google Cloud, and switching providers would be onerous. 74 Snap anticipated expenses of $2 billion with Google Cloud over the next five years. It also had commitments of over $1 billion with Amazon Web Services over the same period. 75 Attracting talent, particularly engineers, posed another significant challenge. The landscape was highly competitive, and the negative perception of Snap's culture as opaque and controlling further impacted its ability to attract talent. " For example, the company was run from multiple private