Snapchat CEO Declares Plans To Take The Company Public
Snapchat Inc.’s CEO Evan Spiegelhas announced plans to go for an initial public offering (IPO). However, the timing and details of the IPO have not yet been revealed.
Background
Los Angeles-based Snapchat is a mobile application for sending disappearing photos. It allows users to take photos, record videos, add text and drawings, and send them to a controlled list of recipients. The photos and videos disappear within 1–10 seconds, depending on the sender, after the recipient views them.
The application was officially launched in 2012, and was made available to both iOS and Android users. The company now has 330 employees.
In 2013, the company caught the attention of tech giants Facebook Inc. (FB -Analyst Report) and Google Inc. (GOOGL - Analyst Report), who offered to acquire Snapchat for $3 billion and $4 billion, respectively. But Snapchat founders declined those offers, hinting at growth and expansion plans. Moreover, earlier this year, Chinese e-commerce giant, Alibaba Group Holding Ltd (BABA - Analyst Report) committed to a $200 million investment in the company.
Valuation
Currently, Snapchat is valued at $10 billion, with the closing of a $485 million round of funding back in December. The company announced plans for a $500 million funding round, which would value the company at $19 billion, making it the third-most valuable tech company following Xiamoi ($46 billion) and Uber ($41 billion).
In a recent filing with the U.S. Securities and Exchange Commission, Snapchat said that it has raised money from 23 investors, but refused to disclose their names.
Bottom Line
Snapchat has molded itself into a company fit for the digital age and technology-grounded economy. The company’s technologically advanced product offerings and smart advertising strategy have helped it gain significant momentum.
However, Snapchat also needs to get the success formula right if it intends to sail successfully in the IPO race. The company also needs to generate substantial revenues in order to present a compelling IPO investment rationale. Hence, it’s still too early to tell if Snapchat will generate enough money for the company to go public.
Portable HD camera maker GoPro (GPRO - Snapshot Report) which launched its IPO in 2014, carries a Zacks Rank #1 (Strong Buy).
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