Putting Snapchat, the messaging app, a step closer to the biggest U.S. stock market debut since 2014, the company has filed for an initial public offering, reported the media quoting sources familiar with the situation.
The Venice, California-based company would be made the largest IPO since Chinese e-commerce giant Alibaba Group Holding Ltd’s went public two years ago valued at $170.9 billion as the company could go public as soon as March and be valued at $20 billion to $25 billion.
Since Facebook Inc’s debut in 2012 with a value of $81.2 billion, it would be the largest U.S. technology IPO.
Companies with less than $1 billion in revenue are allowed to quietly test investor appetite while keeping financials confidential as they can secretly file for an IPO under the U.S. Jumpstart Our Business Startups Act. Companies and Snapchat has done exactly that by filing with the Securities and Exchange Commission under the aforesaid act.
For many of the largest so-called “unicorns,” private, venture-backed companies that are valued at more than $1 billion, a Snapchat IPO is seen by many investors as a bellwether. Including companies like Snapchat, car-sharing company Uber Technologies Inc and home-sharing company Airbnb, these companies are valued in the tens of billions of dollars and are nicknamed “decacorns”. It is unproven whether they can beat or even replicate such astronomic valuations with more scrutinizing public investors and no decacorn has yet tested the public market yet.
With investors left skittish due to volatile technology stock performance and uneven returns from recent IPOs, the market for technology IPOs for this year has been rocky.
Noting a a 58 percent decline in proceeds and 20 percent drop in the number of offerings from this time last year were 123 U.S. technology companies have gone public, raising $7.1 billion this year to date.
Snapchat allows users to send photos that vanish within seconds and it started in 2012 as a free mobile app. It is an attractive way for advertisers to reach millennials since it has more than 100 million active users, about 60 percent of whom are aged 13 to 24.
Media reports had said that the company raised $1.81 billion in May, which valued it at about $20 billion in venture funding.
However, the company’s only significant revenue source is its advertising sale which has kept investors worried.
Earlier this month it debuted its $130 video-camera sunglasses after it began describing itself as a camera company in September. “Snaps” – the company’s terms for video and photo messages sent on its app, can be taken ad sent by the glasses that are equipped with a camera that connects wirelessly to a smartphone.
A line of more than 100 people quickly formed in front of a vending machine on a Venice, California, boardwalk where the glasses were being sold according to postings on Twitter.
General Atlantic, Sequoia Capital, T. Rowe Price and Lone Pine are among the investors of the company. Fidelity Investment, Kleiner Perkins Caufield & Byers and Yahoo Inc. were investors in previous rounds.
(Adapted from Reuters)