Snapchat lets users create pictures and send to friends. These pictures only last a limited time. I decided to take a look through their 145 page 10-K to see what is going on with this company.
At a share price of $17.26 it has a market cap of 20 billion dollars.
They have never posted a profit. Ever.
EBITDA:
FCF gets worse and worse.
Than we get to the interesting part. 
From the 10-K:
“Research and development expenses for the year ended December 31, 2017 increased $1.4 billion compared to the same period in 2016. The increase was due to a $1.1 billion increase in stock-based compensation expense primarily due to the recognition of expense related to RSUs with a performance condition satisfied on the effectiveness of the registration statement for our IPO in March 2017. The increase was also driven by an increase in research and development headcount of approximately 84%. The investment in personnel supported our efforts to continue growing our user base and building and improving products for our
users and advertisers”
From the 10-K:
“General and administrative expenses for the year ended December 31, 2017 increased $1.4 billion compared to the same period in 2016. The increase was primarily due an increase in stock-based compensation expense of $1.2 billion, composed of an award granted to our CEO with an expense of $636.6 million and the remainder primarily related to the recognition of expense related to RSUs with a performance condition satisfied on the effectiveness of the registration statement for our IPO in March 2017. The increase for the year ended December 31, 2017 was also driven by increased personnel costs from an increase in general and administrative headcount of approximately 24%. Additionally, there was an increase in professional fees related to increased acquisition activity, legal, and general growth.”
Management at snapchat believe they have done such a fabulous job for their shareholders they decided to reward themselves.
The conclusion of this post is from the 10-K itself:
“We have incurred operating losses in the past, expect to incur operating losses in the future, and may never achieve or maintain profitability.
We began commercial operations in 2011 and for all of our history we have experienced net losses and negative cash flows from operations. As of December 31, 2017, we had an accumulated deficit of $4.7 billion and for the year ended December 31, 2017, we experienced a net loss of $3.4 billion. We expect our operating expenses to increase in the future as we expand our operations. If our revenue does not grow at a greater rate than our expenses, we will not be able to achieve and maintain profitability. We may incur significant losses in the future for many reasons, including without limitation the other risks and uncertainties described in this report. Additionally, we may encounter unforeseen expenses, operating delays, or other unknown factors that may result in losses in future periods. If our expenses exceed our revenue, our business may be seriously harmed and we may never achieve or maintain profitability.”
Would you buy this company for 20 billion dollars?