Snapchat has been rather busy in recent months. After introducing various new app features, rebranding itself into Snap Inc., and announcing the Spectacles, its very first smart glasses, the Californian firm is presumably planning for a rather bright future. And if the latest report by The Wall Street Journal is to be believed, that bright future includes going public. That’s right, five years since launching the popular messaging app and a few months after reaching 150 million daily active users, the Venice-based company is reportedly preparing for an initial public offering (IPO).
Sources claim that Snap’s stock market launch may happen as early as March of 2017 and that the company is hoping its total stock value will reach at least $25 billion. While that’s a rather large number, Snap has definitely demonstrated a lot of growth potential on all fronts that matter as the popular service has been rapidly increasing its user base and revenue for a while now. Still, considering the increasing amount of money it’s currently making and the fact that it has just raised $1.8 billion in private financing five months ago, one might wonder why would Snap go public in this situation? After all, TechCrunch has just reported that Snap will generate up to $1 billion in revenue next year while “only” reaching somewhere between $250 million and $350 million this year. If the company is doing so well and growing so rapidly, why would its private owners and investors push for an IPO now, of all times?
As it turns out, there are many reasons to go public, even when not facing any financial issues. First of all, public companies almost always get better rates when issuing debt and can issue additional stock as long as there’s a demand for it. This is possible because of a higher level of scrutiny public companies are subject to. Why is the ability to always issue more stocks so great? Because additional stocks equal additional money and this indirectly also facilitates potential mergers and acquisitions as publicly traded companies can issue stock as a part of a larger deal. Being publicly traded also means being more liquid which is basically never a bad thing when you’re a rapidly growing firm like Snap. Finally, going public doesn’t just raise cash but in cases like these, it raises a lot of cash. Sure, Snap isn’t strapped for money but it’s definitely going to need more if it wants to continue fueling its crazy growth.
So, going public would definitely make sense for Snap at the moment but it remains to be seen whether there’s any substance to these reports. Not surprisingly, the company’s representatives declined to comment on the matter and asserted that they’re not planning to give any additional attention to rumors regarding its financing endeavors.