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Snap, the company behind Snapchat, is expected to price its initial public offering today and start trading on the New York Stock Exchange tomorrow.
Ahead of Snap’s IPO, Recode Senior Editor Kurt Wagner answered some of what are no doubt the questions you’re dying to ask.
What does an IPO actually mean?
IPO stands for Initial Public Offering, and it's the first time that a private company starts selling its stock on the public stock market. That means you (yes, you!) are now able to buy a piece of Snap.
Does this mean we’re all getting rich?
Sorry, you're probably not gonna get rich, but you never know. People invested in Facebook at $20-$30 a share. It's now worth over $100, so you can make some money.
Someone is getting rich off this IPO. Who?
Snapchat's co-founders are going to get very rich. Evan Spiegel and Bobby Murphy are both going to be worth billions of dollars by the time this whole thing is done.
Why does Snap want to go public?
Companies go public for a number of reasons: First, to pay back their investors that have given them money along the way to keep the business going. It's a good way for founders and executives to actually cash out some of the stock that they've earned during their time working there. It's also a way for the company to raise money from people like you who may invest. They can use that money to do things like acquisitions, international expansion and new product growth, things that Snap would love to do.
Does Snap even make money?
Believe it or not, Snapchat is a real business. The company brought in over $400 million in revenue last year, the vast majority of which came from advertising. So, even though the app is free, the company is still making money by putting ads alongside all the content that you're creating inside the app.
Doesn’t Snap make money in other ways?
Snap also makes hardware, called Spectacles. These are video-recording sunglasses that, until recently, you had to buy out of a vending machine. Snap says those sunglasses don't create meaningful revenue for the company. So while they may be cool, they're not actually benefitting the company's bottom line.
What could possibly go wrong with Snap going public?
When you're a publicly traded company, you have to share a lot of information and you have to do it regularly. When you're private, you can keep things like revenue or user growth to yourself, but now, as a publicly traded entity, Snap's going to have to report that number publicly to investors. That means if things aren't going well, all of us are going to know about it.
This article originally appeared on Recode.net.
