Snap is working on an IPO for March that would value the company at $25 billion – Business Insider


evan spiegel
Snap Inc. CEO Evan
Spiegel

AP Photo/Jae C.
Hong


Snap Inc., the company formerly known as Snapchat, is working on
an initial public offering for March that would value the company
at $25 billion,
according to The Wall Street Journal
.

A source familiar with the matter confirmed the company’s IPO
ambitions, but told Business Insider that the situation is still
“fluid” and that Snap hasn’t hired bankers at this point. The
March timeline is arbitrary, given uncertainties like the outcome
of the presidential election and the state of the capital
markets, according to the source.

Bankers say they have been courting Snap for months in
anticipation of an IPO. It’s seen as best positioned to approach
the IPO markets early in the year, one person said, among tech
companies expected to float their shares in 2017.

Another source said Snap is expected to choose bankers by
December.

Snap declined to comment on its IPO plans when reached by
Business Insider.

“We aren’t going to comment on rumors or speculations about any
financing plans or alternatives,” a spokesperson said.

Snap has told investors that it expects to make between $250
million and $350 million in advertising revenue this year,
according to The Journal. A recent eMarketer report predicted
that the company
will near $1 billion in revenue in 2017
— meaning a $25
billion IPO would be priced at 25 times its projected revenue
numbers.

The company last raised $1.81 billion in private funding in May,
which pegged its valuation at between $18 billion and $22
billion.


The Information previously reported
that the company was
looking to go public as soon as later this year or early 2017.

A $25 billion IPO would be the largest public offering for a tech
company since Alibaba went public in 2014 for $168 billion, and
would come at a time when the tech IPO market has been in the
doldrums.

It would also be a huge coup for Evan Spiegel, the 26-year-old
entrepreneur who started Snapchat as a student at Stanford and
famously turned down a $3 billion bid from Facebook in 2013.

The path to going public

Spiegel has been clear about his company’s plan to go public. “We
need to IPO,”
he said onstage at the Code Conference
in May 2015. “We have
a plan to do that.”

In the last two years, his ephemeral messaging app has ramped up
its advertising efforts, adding sponsored geofilters and animated
selfie “lenses,” and inserting video ads between users’ stories.

In May, a Securities and Exchange Commission filing revealed that
Snapchat
had quietly added an IPO specialist
, Stan Meresman, to its
board — an early indicator that the company was preparing to go
public. Another key IPO driver is Snapchat Chief Strategy Officer
Imran Khan, a former Credit Suisse banker who helped take Alibaba
public in 2014.


eMarketer_Snapchat_Ad_Revenues_Worldwide_US_vs_Non US_2015 2018_215545eMarketer

Beyond adding personnel, Snapchat has evolved from being only a
social messaging app to calling itself a camera company.

Most recently, Snapchat rebranded as Snap Inc. and unveiled its
Spectacles, which are smart glasses. Spiegel isn’t banking on the
glasses becoming a significant revenue stream for the company —
at least at this stage. The company
recently told The Journal
that the glasses would have
“limited distribution” when they go on sale.

In its announcement, Snapchat said the new name was meant to
appeal to public investors. “You can search Snapchat or
Spectacles for the fun stuff and leave Snap Inc. for the Wall
Street crowd :)” the company
wrote in a blog post
.

As part of Snap’s evolution, it’s become an increasing threat to
Facebook and Instagram in terms of both attracting younger users
and chasing ad dollars. A Nielsen study from September 2015
showed that the company was reaching 41% of all 18- to
34-year-olds.

That number is likely higher now. A recent eMarketer study said
that Snapchat will have
reached 58.6 million people in the US
, or 31.6% of social
media users, by the end of 2016.

Portia Crowe contributed additional reporting.


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