Social media company Snapchat is preparing an initial public offering that would value the company at a whopping $25 billion.
Paresh Dave of the Los Angeles Times had the news:
As one of the few private companies in the world valued at more than $10 billion, Snap already has raised the Los Angeles tech industry’s profile. An IPO would not only further establish both the company and the community on the global stage but also lead to a bevy of newly wealthy employees who may begin to invest in other local firms.
Tom Unterman, a founding partner at Santa Monica venture capital firm Rustic Canyon Partners since 1999, said a Snap IPO would dwarf the region’s previous Internet offerings, such as those of EToys and TrueCar.
“The IPO is a rite of passage. When you do that, the markets have recognized this is real and there’s real value,” Unterman said. “It’s impactful because it tells the investment world that there’s big things happening in the tech scene in Los Angeles.”
Snap spokeswoman Mary Ritti declined to comment on rumors about the company’s financing plans.
Maureen Farrell, Juliet Chung and Rolfe Winkler of The Wall Street Journal said the offering could come as early as March:
There is no guarantee the four-year-old Venice, Calif., company will proceed with a share sale in that time frame, and there is no guarantee it will achieve a valuation of $25 billion or more.
If Snap, best known for allowing users to send disappearing messages from their smartphones, moves forward as planned, it would be the biggest company to go public on a U.S. exchange since 2014. That is when Chinese e-commerce company Alibaba Group Holding Ltd.made its debut at a $168 billion valuation.
Snap would become the first of a small group of highly valued and closely watched venture-backed companies, led by Uber Technologies Inc., to test the public markets.
A level of $25 billion or more would also represent a significant premium to Snap’s most recent valuation, which waspegged at $17.8 billion in its last private funding round in May. That would bode well for a new-issue market that until recentlysuffered from reluctanceon the part of public investors to match the private valuations of many Silicon Valley startups.
Alex Heath and Biz Carson of Business Insider noted Snapchat’s ad revenue projections:
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.
