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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