Snapchat seeks to raise US$4b in IPO

Snapchat is seeking $4b in its initial public offering. Photo / Getty

Snapchat will seek to raise as much as US$4b (NZD$5.6b) in its planned initial public offering, according to people familiar with the matter.

The IPO could value Snapchat at about US$25 billion to US$35 billion, the people said, asking not to be identified as the details aren't public. No final decision has been made and the size of the IPO may change, they said. The valuation could reach as much as US$40 billion, one of the people said.

Valuations can vary in the lead up to an IPO as companies may try to temper expectations among investors, while others on the deal are more likely to promote higher numbers.

Snapchat, which recently changed its corporate name to Snap Inc., is preparing filings for a listing and aims to sell shares in the first quarter of next year, people familiar with the plans said earlier this month. Because the company's revenue is less than US$1 billion, it plans to file IPO documents confidentially with the U.S. Securities and Exchange Commission, one of the people said.

A representative for Snapchat declined to comment.

A Snapchat IPO early next year could set the stage for a resurgence of technology listings after a slow 2016. Just nine technology companies have priced U.S. IPOs this year, according to data compiled by Bloomberg, the fewest for seven years. The biggest among them, Twilio Inc., raised US$172.5 million in June and has more than doubled in value since its trading debut.

The last buzzy consumer-tech listing in the U.S. was in November 2015 when Match Group Inc., the online-dating powerhouse that owns Match.com, OKCupid and Tinder, went public at a valuation of US$2.9 billion.

Snapchat chose Morgan Stanley and Goldman Sachs Group Inc. to lead its offering, giving the former its biggest advisory role on a technology IPO since it led Facebook Inc.'s tumultuous listing more than four years ago. JPMorgan Chase & Co., Deutsche Bank AG, Allen & Co., Barclays Plc and Credit Suisse Group AG will also be involved as joint book runners, the people said.

The Los Angeles-based company makes an application for sharing selfies and videos, watching news videos and chatting with friends. After its last funding round, Snap's private market value reached US$18 billion, meaning that its IPO would be the biggest of a social media company since Twitter Inc. sold shares in November 2013.

Snap aims to generate more than US$350 million in advertising revenue this year, up from US$59 million in 2015, people with knowledge of the matter have said.