Snap, the company that created the popular messaging app Snapchat, has hired investment banks Morgan Stanley and Goldman Sachs in preparation for an initial public offering (IPO) as early as March this year. This IPO is expected to value the technology company at between $20 billion and $25 billion. This would represent the biggest US tech IPO since 2013, when Twitter launched at a valuation of $18 billion. Snap possesses less than $1 billion in revenues, meaning that it should be able to file its IPO paperwork privately under the Jobs Act.
The news of Snap’s appointment of banks follows its rebranding that took place last month. It had changed its name from Snapchat to Snap in an attempt to diversify. Indeed, it had announced that it wanted to move beyond the picture messaging app; at the same time, it revealed a push into hardware, launching sunglasses named Spectacles which feature an integrated video camera.
Snap raised $1.8 billion in a series F private fundraising round earlier this year, bringing its total funds to about $2.6 billion. The start-up generates its revenue from advertisements slotted into stories and channels on the Discover platform. However, advertisers are concerned that it is more difficult to measure the efficacy of ads through snapchat, as opposed to through its rivals such as Facebook. Forecasts from research firm E-Marketer have predicted that Snapchat will generate $367 million in advertising revenue this year, rising 155 per cent to $936 million next year.