Its product may vanish in the blink of an eye, but Snapchat is poised to become one of America’s most valuable tech companies if it moves forward with a planned initial public offering.
The picture and video messaging firm – which recently rebranded itself for corporate purposes as Snap, Inc. – has reportedly hired two large investment banks, Goldman Sachs and Morgan Stanley, to advise it on how to tap the public equity markets.
Hiring advisory firms is usually one of the first signs that a company intends to make an initial public offering. The process, governed by strict federal regulation and stock exchange rules, culminates with a sale of shares to the public. By hiring advisors now, Snap Inc. could debut on the stock market as early as next January.
Recent research firm reports have valued Snap at $19 billion. However, some of the information that will ultimately be required for potential investors to gain a full picture of the company has not been made public. With revenues currently less than $1 billion annually, Snap is allowed to file its Securities and Exchange Commission application for an initial public offering confidentially.
When the firm begins its roadshow process, investors will be able to get a clearer picture of the firm and its prospects. Snap has hired JPMorgan Chase, Deutsche Bank, Allen & Company, Barclays and Credit Suisse to help it sell its shares as part of that larger public launch.
Snap, founded by Stanford University students in 2011, has become an extremely popular social media destination for teenagers. The app, free to download and use, is expected to earn $1 billion in revenue next year as it gradually rolls out sponsored posts for advertisers and channels for brands such as CNN and Cosmopolitan.
The fledgling company is one of Silicon Valley’s many unicorns, private firms valued at $1 billion or more. The existence of so many valuable tech properties has given rise to fears of another tech bubble, but few have tapped the equity markets. Snap’s offering will arguably be the biggest tech debut since Twitter.