Snapchat owner Snap reveals $515m loss - as it files for $25bn public share offering

Snap's prospects: No profit, no voting rights and highly dependent on Google, who it pays $400m per year

Snap, the owner of popular picture-sharing app Snapchat, has revealed a whopping $514.6m loss for 2016 - contained within its plans for a $25bn share offering, filed this week.

The company is expecting to raise $3bn in the share offering, which would value the company at around $25bn. The information was revealed in the company's S1 filing with the Securities and Exchange Commission (SEC).

The document reveals that Snap achieved revenue of $404.5m in 2016, compared to revenue of $58.7m in 2015, more than tripling average revenue per user (ARPU) as the company added users.

However, net losses also increased from the $372.9m the secretive company admitted for 2015. The company also burned through $611.2m in net case used in operating activities. Again, this was more than double the $306.6m in net cash it burnt through in 2015.

And despite these financing difficulties, the company is only offering non-voting Class A stock in the share offering. That means that public shareholders in Snap will have no say in how the company is run, including the election of directors to the board of the company.

As a result, Evan Spiegel, Snap co-founder and CEO, along with Robert Murphy, co-founder and chief technology officer, will "have the ability to control the outcome of all matters submitted to our stockholders for approval", admits the S1 document.

In addition to the founders retaining de facto control of the company via their holdings of the Class C shares, potential investors might also be concerned about the company's dependence on Google's cloud to offer the company's app and services.

The company is committed to spend at least $2bn on the Google cloud over the next five years - $400m per year - and its service is dependent on the Google cloud, according to the S1.

"Any transition of the cloud services currently provided by Google Cloud to another cloud provider would be difficult to implement and will cause us to incur significant time and expense," notes the S1.

It continues: "[We] have built our software and computer systems to use computing, storage capabilities, bandwidth, and other services provided by Google, some of which do not have an alternative in the market. Given this, any significant disruption of or interference with our use of Google Cloud would negatively impact our operations and our business would be seriously harmed."

The company's dependence on Google could either make it highly susceptible to price hikes in the future by the internet giant, or an acquisition target.

Snap claims that an average of 158 million people currently use Snapchat daily, with 2.5 billion ‘snaps' - pictures of videos - being created every day. Should growth slow or the company reach saturation point, that will affect its ability to achieve profitability, which on the current figures is highly dependent on a high percentage of the world's smartphone users downloading and using the company's app.

Indeed, the company notes that the majority of its users are in the 18-34 age bracket, which is also the least loyal age demographic; and the company further notes that usage even at the moment drops off among users above the age of 25, who presumably have better things to do.

Snap generates revenues primarily via advertising, which will also make the company vulnerable to the vagaries of the internet advertising market. "We help our advertising partners generate a return on their investment by creating engaging advertising products that reach our large and desirable audience," claimed the company in its S1 filing with the SEC.

The company was originally marketed around its picture-sharing app, but has recently rebranded itself as a camera company, to take advantage of its software, which provides filters and other visual effects for pictures and videos taken on Apple iOS and Android smartphones.

Its rush to IPO comes at the same time that the US Dow Jones index of industrial companies reached an all-time high after breaching the 20,000-point mark - perhaps raising questions over whether another tech-stock crash is on the way.