Snapchat Discloses $650 Million Private Placement

30 May 2015 | Author: | No comments yet »

Snapchat Discloses $650 Million Private Placement.

Snapchat Inc. disclosed it has offered to sell $650 million of stock in a private placement, an opportunity for the company and insiders to profit from the messaging company’s popularity. The mobile messaging start-up said in a regulatory filing that is has raised $538 million in new funding; according to Bloomberg the new investors include Chinese e-commerce giant Alibaba and venture capital firms York and Glade Brook.Snapchat Inc. raised $537.6 million in a sale of common stock, with the funding round valuing the messaging startup at about $16 billion, a person with knowledge of the matter said.

According to a filing Friday with the Securities and Exchange Commission, more than $537.6 million was sold from the offer and that $112.4 million remained available. CEO Evan Spiegel said earlier this week that Snapchat would eventually seek an IPO, but warned the current tech bubble could burst, and that “people are making riskier investments.”

Shares being sold in the up to $650-million round of funding, if completed, are being priced such that Snapchat is valued at $16 billion, CNBC reported Friday. That would bring Snapchat’s total financing to more than $1.2 billion, according to Crunchbase, as the company builds its business in pursuit of an eventual initial public offering.

By raising the latest funding in common stock, Snapchat is bucking convention for later-stage venture deals, which tend to include preferred-stock provisions that allow investors to decrease their risk. “Investing in common stock, especially at a $16 billion valuation, is not normal,” said Anand Sanwal, chief executive officer of venture-capital data firm CB Insights. “It highlights the leverage that Snapchat had in these negotiations because the investors aren’t getting the protections they normally ask for.” Investors in the latest round include Access Industries, York Capital Management, Glade Brook Capital Partners and Alibaba Group Holding Ltd., said the person, who asked not to be named discussing nonpublic information. Snapchat, started more than three years ago at a Stanford University fraternity, has been refining its pitch to advertisers and taking on media partners to build a television-like set of channels on the mobile application, which lets users send text messages that disappear quickly. The company has joined with media brands including ESPN and Yahoo on its Discover service, which shows news articles and videos that disappear after one day. Vertically oriented trailers, about 10 seconds long, for the movie appeared in the National Geographic channel on Snapchat and the short cosmetics ads came inside the Cosmopolitan magazine channel.

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