Snapchat's parent company expects to raise up to $4 billion by going public early next year, Bloomberg reported Wednesday.
Snap Inc.'s IPO plans remain in flux, but sources familiar with the discussions have told The Times the company expects to raise at $2 billion at minimum. That would be close to what the Venice startup raised in its most recent series of private financing deals.
The initial public offering could value Snap at anywhere between $25 billion to $40 billion, a source not authorized to speak about private deliberations said recently. Investors could be willing to pay on the higher end — especially for a company not believed to be profitable — because Snap could represent one of the first offerings of a group of hot app companies including Uber, Dropbox and Pinterest. Tech IPOs have been a rare sight this year, leading to additional demand for the few companies that are going public, investment bankers say.
Michael Grimes, the top banker for Morgan Stanley's technology division, said Wednesday that prices have been trending in tech companies' favor. Morgan Stanley and Goldman Sachs are the banks leading Snap's public offering, Bloomberg reported.
"They are starting to meet closer to the sellers' side," Grimes said at a Wall Street Journal industry conference.
He added that investors are willing to bet on unprofitable companies as long as a long-term sustainability path is in sight.
"It's not about the trailing rear view mirror or whether it's two quarters away or 10 quarters away," Grimes said of profits. "It's about can you draw a line to profitability without making a leap of faith."
Snapchat has many uses for the cash as it surges past 1,000 employees worldwide, scoops up more office space and expands hardware development beyond its recently unveiled Spectacles video-camera sunglasses.
"You're going to see a product flow from that company that's unique for companies of its ilk," Snap board member Mitch Lasky said on stage at the L.A. Tech Summit event this week.
Snap has declined to comment on financing matters.