For years, Los Angeles’ tech industry has been waiting for its big day: image-sharing app Snapchat’s initial public offering. Now the region’s engineers and investors may finally be able to start circling dates on the calendar.
Speculation that the Venice start-up will go public in the first quarter of next year escalated Thursday when the Wall Street Journal reported the company is eyeing a price tag of at least $25 billion, suggesting the plans are coming into focus.
The valuation could produce the U.S. stock market’s biggest initial public offering since online shopping giant Alibaba debuted at a $168-billion valuation in 2014.
Snapchat, now formally known as Snap Inc., has been beefing up its finance team to prepare for the IPO and handle an influx of cash. Snap could bring in close to $500 million in revenue this year, almost 10 times as much as last year. It expects to exceed $1 billion in 2017, according to people familiar with the matter. Whether Snap is profitable is unclear.
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.
It's uncertain how much money Snap is seeking to raise, but the company’s investors expect the total to be close to the nearly $2 billion raised during its most recent financing earlier this year. Venture capitalists and other investors in that transaction valued the company at more than $16 billion, not counting the new funds.
Snap could use the money to maintain its brisk hiring pace, which has seen it grow from a few hundred employees to more than 1,000 this year. And using its publicly traded shares as currency, Snap could continue to use acquisitions as the starting point for new initiatives.
For example, a start-up Snap acquired two years ago devised the prototype for Spectacles, sunglasses with an integrated video camera that the company plans to begin selling later this year. It’s also invested in media companies through joint ventures with Hearst and Vertical Networks.
Snap’s Snapchat app is used by more than 150 million people and companies each day to share and view videos, photos and text messages. But the company is just getting started in the eyes of Snap Chief Executive Evan Spiegel, who has said he wants his firm to reinvent the camera, informing and entertaining people along the way.
Snap’s ambitions — and the thirst for hot stocks in a market that has seen the number of new listings plummet this year — could explain why company investors expect to see shares command a significant premium compared with tech peers such as Facebook and Twitter.
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