The founder of Snapchat is about to pull a Mark Zuckerberg move.
Evan Spiegel, CEO of Snap Inc., will follow in the Facebook (FB) CEO’s footsteps in more ways than one when Snapchat’s parent company goes public, expected to happen next month.
Snap at long last filed Thursday for a $3 billion initial public offering that could value the photo and video messaging company at as much as $25 billion, the biggest valuation in a U.S. tech IPO since Facebook.
But the Snap filing also shows how closely Spiegel is following Zuckerberg’s playbook. Although Spiegel made $2.4 million in 2016 (including a base salary of $500,000)—upon Snap’s IPO, his salary will be cut to just $1 per year.
After Facebook’s IPO in May 2012, CEO Zuckerberg asked that his annual salary be reduced to $1 beginning in 2013, and it has stayed the same ever since. Alphabet CEO Larry Page and Google (GOOGL) co-founder Sergey Brin also began making salaries of $1 at their own requests after the search engine company went public in 2004.
While the $1 salary has become trendy in the tech industry, Spiegel’s choice is a sign of confidence. He’s banking on his Snap stock being worth so much after the IPO that he will no longer need a regular paycheck.
With Spiegel owning 22% of Snap’s class A common stock, he will become an instant billionaire in the IPO: If Snap achieves that golden $25 billion valuation, Spiegel’s shares will be worth nearly $5.5 billion.
Spiegel’s employment contract does currently provide for a $1 million annual bonus, but it seems he is about to give that up, too. Snap’s IPO documents stipulate that “after our initial public offering, Mr. Spiegel will not be entitled to any bonus, except as may be determined by our board of directors.”
But as much as Spiegel might like to position Snap as a major social media company on par with Facebook, the fact is, he will be far less rich than Zuckerberg was when his company went public. Even with Facebook’s botched IPO, Zuckerberg still achieved a net worth of $19.1 billion overnight at the time. Spiegel, with a potential net worth of up to $5.5 billion, will have a bit less of a cushion.
There are other CEOs making $1 now who made much larger paychecks for many years earlier in their careers. Larry Ellison, for example, the founder and executive chairman of Oracle (ORCL), has only begun taking a $1 salary in recent years, and he has a net worth of about $43 billion. Tesla (TSLA) CEO Elon Musk and Twitter (TWTR) CEO Jack Dorsey decline their compensation, but that’s after their publicly traded stock already made them billionaires.
If Snapchat’s parent company attains the valuation it seeks and Snap stock takes off in the IPO, Spiegel will be one of the youngest billionaires on the planet, potentially with enough money to last the rest of his life. But if investors balk at the stock’s extremely rich valuation and the share price falls, Spiegel may want his paycheck back sooner rather than later.