Is Snapchat Going Public?

GuruFocus.com
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- By Sydnee Gatewood

Popular social media platform Snapchat may soon be going public. The company, which recently changed its name to Snap Inc., revealed it is working on an initial public offering that could potentially value the company at $25 billion or more.

If the plans move forward, the Venice, California-based company would be the biggest technology company to go public on a U.S. exchange since 2014, when Alibaba (BABA) debuted.


Snap's debut would also boost the new-issue market, as only 19 technology companies have gone public on U.S. exchanges this year.

Snap hired former investment banker Imran Khan as the company's chief strategy officer to guide the way in constructing the company's filing. Khan served as a key adviser on the Alibaba IPO.

Launched in September 2011, Snapchat quickly gained popularity among users as they were able to share selfies and other images that were short-lived and self-deleting. Since then, the company has added the ability to record video and place various filters and lenses over the images.

In May 2012, the company's founder and CEO, Evan Spiegel, described the company's mission in a blog post.

"Snapchat isn't about capturing the traditional Kodak moment," he wrote. "It's about communicating with the full range of human emotion - not just what appears to be pretty or perfect."

The company turns a profit mainly from advertising that appears between users' "stories," posts they share with all their followers, for a 24-hour period. Marketers can also purchase special geofilters for specific locations or events. In 2015, the company reported $60 million in revenues. For 2016, the company told investors it expects revenue between $250 million and $350 million and as much as $1 billion in 2017.

In 2013, Spiegel rejected a $3 billion cash takeover offer from Facebook (FB). Its entrance to the market may add fuel to the fire between the two companies, as Facebook has adapted its image-sharing platform, Instagram, to mimic some of Snapchat's features, namely sharing temporary stories. Facebook was valued at $350 billion in April, making it the sixth most valuable company in the U.S.

Snap was valued around $20 billion in its last private funding round in May, and the company would benefit from the $25 billion valuation if and when it enters the market.

According to the Wall Street Journal, the company is hoping to begin selling shares as early as March.

Disclosure: I do not own stock in any companies mentioned in the article.

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