Snapchat IPO talks get investors interested
The Chief Executive Officer (CEO) of Snapchat, Evan Spiegel, has taken a bold decision to announce his intention to publicly list his company, rather than sell it to Facebook. The plans to take Snapchat public were announced in April 2015.
24-year old Spiegel addressed the Code Conference recently where he stressed the need to launch an Initial Public Offering (IPO). According to analytics, Snapchat’s daily use statistics put the number of users at approximately 100 million.
As a result of its worldwide popularity, Snapchat’s valuation has hit a figure of $15 billion. Barely two years ago, Spiegel walked away from an offer from Facebook which valued his company at $3 billion. There are even reports suggesting that Snapchat could increase in value to as high as $19 billion.
Snapchat is certainly in distinguished company. Other companies that command valuations as high as Snapchat include the ride company Uber, Xiaomi Corporation – a smartphone manufacturer, and WhatsApp (which was acquired by Facebook in 2014 for $22 billion).
Uncertainty remains about IPO
Investors are aware that there is a tech bubble at present. Stocks like Facebook, Apple, Google and others are enjoying an unprecedented bull run and valuations are sky-high. While Evan Spiegel preferred not to discuss the IPO, he intimated that the tech bubble effect has been factored into Snapchat’s strategic outlook.
For investors, Snapchat’s potential IPO is something of interest. While the existence of a tech bubble is something that most everyone is aware of, there is still considerable profit potential vis-à-vis investing in Snapchat stocks when they list. Many leading figures have privately held that the high tech stocks are overvalued and that a correction is on the cards.
Evan Spiegel went as far as saying: ‘The tech bubble is real and yes, it will burst.’ This sentiment was expressed despite the fact that Snapchat is enjoying a solid run of form from the recent tech bubble. According to Spiegel, the easy money policy that is fuelling the investment bubble is cause for concern. Since the interest rate is so low, it is fairly easy to borrow large sums for investment purposes.
Whether or not Snapchat is worth its current valuation is up for debate. Spiegel has been working hard behind the scenes to facilitate easier use of his product so that it can appeal to a much larger user base.
The much-hyped correction in tech stocks could hover around 10% to 20%, possibly even higher. These market insights were received by the Wall Street Journal from Spiegel’s emails back in 2013. As testament to the existence of a tech bubble Apple (AAPL) stocks have spiked by as much as 50% and Facebook stocks have risen to just under $80 per share.
Buzzfeed IPO plans
More hype was generated at the Code Conference in California recently when Buzzfeed CEO Jonah Peretti announced that IPO plans were on the cards. The fact of the matter is that both Buzzfeed and Snapchat are well-funded private companies.
As to their motivations for going public, the IPO certainly fits the narrative of increasing valuations, accessing capital and expanding the company’s global reach.
Investors looking to add these tech stocks to their financial portfolios will be heartened by the solid foundations that Buzzfeed and Snapchat are built upon. Buzzfeed is actively building its video business and that will allow for greater diversification. At the time of writing, Buzzfeed employs 900 people in its tech business building in San Francisco.
Before any investment decisions are made with either of these companies, a closer inspection of the S-1 disclosures with the SEC will provide valuable insights as to the viability of these future IPOs.
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