Snap, the parent company of Snapchat recently filed their IPO announcement expecting raise $3 billion which would value the company between $20 — $25 billion. In preparation for the filing, the often secretive company has produced financial and user information for the first time.

While many are excited about investing into another multi-billion dollar tech company, here’s why I think it could be too little too late:

Competition

Snap’s IPO filing to raise $3 billion seems vaguely reminiscent of Facebook’s offer to buy them in late 2013 for the same amount. Snapchat turned down the offer which turned Facebook into their number one competitor.

Zuckerberg pivoted by positioning newly acquired Instagram (purchased for $1 billion in 2012) to compete with Snapchat and launched Stories in the third quarter of 2016. The result? Snapchat’s growth slowed by 82% for the first time in company history.

Users

Snapchat says they have about 158 million active users. Most of them are in the United States.

Instagram has 500+ million active users. 80% of them are outside of the United States.

A tech company at this valuation must have a more diversified user base than American Millennials who are not historically prone to app loyalty.

Losses

Snapchat is loosing more and more money. They recorded net losses of $372.9 million in 2015 followed by more net losses of $514.6 million in 2016. On top of that, the IPO filing warns that Snapchat “may never achieve or maintain profitability.”

“To me, Snap is Twitter 2.0 — a company with a good growth rate that is losing a ton of cash, coupled with a massive valuation,”

said Brian Hamilton, cofounder of private company analysis firm Sageworks.

To put this into context, the second half of 2016 was possibly the most lucrative, digital advertising period in history. Between a contested election and the Holiday Season, billion of dollars poured into online platforms. If Snapchat can’t slow losses during an economic season like that, it could be a sign of bigger problems.

UI

Lots has been said about Snapchat’s counter-intuitive user interface — how difficult it is, how genius it is — but I don’t see it ever gaining significant market share with Gen X and Baby Boomers.

It’s okay to be the new, “hip” platform. Facebook started off the same way. However, Facebook was able to transcend generations and grow it’s user base by adding Baby Boomers and older. That ability to onboard across age demographics is directly connected to their success and profitability.

Snapchat’s UI is perceived as confusing and counterintuitive which has left them with an unproven strategy for reaching a larger market. Left unchanged, it could be their fatal flaw.

In my opinion, the announcement of the IPO seems coincidental with the release of Instagram Stories, the downward trend in their growth and their inability to control losses. The move seems to be more about manufacturing energy and hype for one “last shot.”

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