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Snapchat prepares for IPO that could value it at US$25 billion

By Koh Wanzi - on 14 Oct 2016, 10:49am

Snapchat prepares for IPO that could value it at US$25 billion

Image Source: Snap

Snap Inc., as Snapchat’s holding company recently renamed itself, is preparing for an initial public offering (IPO) that could value it at a staggering US$25 billion. The 5-year-old company might even end up ushering in a new wave of IPOs at a time when such big deals are less common than before.

No tech companies went public in the first three months of this year, a dry spell that has happened only thrice since the early 1990s. In fact, only 84 companies have carried out IPOs in the US this year, a nearly 42 per cent drop from the previous year.

Snap Inc. has reportedly hired investment banks Morgan Stanley and Goldman Sachs to lead the IPO on the New York stock exchange as soon as March 2017. If it sees through its plans to the end, it would be the most high-profile debut by the latest generation of “unicorns”, or private companies valued at over US$1 billion. Its compatriots also include other well-known firms like Uber and Airbnb, which were last valued at US$68 billion and US$30 billion respectively.

While these companies are flush with cash from funds raised from venture capital firms and other sources, an IPO would confer a new status and legitimacy.

Snapchat is currently the darling of advertisers keen to reach Snapchat’s audience of 150 million daily, which currently include 41 per cent of Americans aged 18 to 34. It is expected to generate nearly US$367 million in ad revenue worldwide this year, a figure that is projected to swell to almost US$1 billion next year.

At a US$25 billion valuation, the IPO – assuming it goes through – would also vindicate CEO Evan Spiegel’s decision to turn down a US$3 billion takeover by Facebook in 2013.

Source: The New York Times

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