Snapchat tees up bankers for potential $25bn IPO

US photo-sharing app Snapchat has chosen Morgan Stanley and Goldman Sachs Group as lead underwriters for an initial public offering that could come as early as March, Reuters is reporting.

The banks were notified earlier this week that they had been awarded one of the most coveted and potentially lucrative IPO mandates in recent years, as the company, based in Venice, California, vies for a $25 billion valuation in the stock market.

JPMorgan Chase, Deutsche Bank, Allen and Company, Barclays and Credit Suisse Group will be joint book runners, the Reuters source said.

Snapchat, whose parent is Snap Inc, and the banks were not immediately available to comment on the news first reported by Bloomberg News.

Snapchat started in 2012 as a free mobile app that allows users to send photos that vanish within seconds. It has more than 100 million active users, about 60 per cent of whom are aged 13 to 24, making it an attractive way for advertisers to reach millennials.

Advertising sales

Awash in venture funding, the company raised $1.81 billion in May, which valued it at about $20 billion, media reports said at the time.

But investors worry that Snapchat’s advertising sales, which began last October, are the company’s only significant revenue source. Snap in September starting describing itself as a camera company. Its first physical product will be glasses with an embedded video camera.

Users will be able to record video from their perspective in 10-second increments, which can be synched with their smartphones. The company's last round of funding included General Atlantic, Sequoia Capital, T Rowe Price and Lone Pine. Previous rounds included Fidelity Investment, Kleiner Perkins Caufield & Byers and Yahoo! Inc.

The US IPO market has been unfriendly to technology companies for most of 2016. In the year to date, technology IPOs have raised about $2.3 billion, compared with $5.2 billion over the same period in 2015. But a recent string of such IPOs has instilled more confidence among investors. – (Reuters)