20 November 2013

Snapchat Declined Facebook Buyout Offer

Snapchat, the fast-growing messaging system that registers 5 million daily users, has rejected a $3bn buyout offer from Facebook. The financial experts point out that the offer came as other investors valued the loss making 2-year-old service at over $4bn. At $3bn messaging system would be the most expensive acquisition of the social network ever.
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The application has been downloaded by 9% of mobile users throughout the United States. It allows users to send messages and images with an expiration date – i.e. they are deleted from the recipient’s device after being received. Snapchat claimed to be handling over 350m messages every day.

Evan Spiegel, 23, the co-founder and CEO of the service, decided to wait until early 2014 before considering any offers. Apparently, he hopes that Snapchat’s numbers will grow enough to justify a larger valuation. In fact, Snapchat’s valuation has been growing along with its user base – for example, in June 2013 the company raised $60m from investors that valued it at $800m. There were reports that Facebook offered $1bn for the company earlier in 2013, while China’s Tencent was discussing an investment that would value Snapchat at over $3.6bn.

Back in October, Pinterest, a social scrapbooking company, had raised $225m in new funds at a price which valued the company at $3.8bn. In the meantime, valuation of Snapchat and its social media peers will likely soar after Twitter’s IPO, which has valued the company at over $23bn.

Industry experts point out that the rapid growth in the company’s valuation reminds that of Groupon, the Internet discount company which has also rejected a $6bn offer from Google before filing for an IPO. Two years ago, Groupon started trading and was valued at over $16bn, but soon crashed to less than $4bn. However, the company has since recovered and is now worth about $7bn.

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