Snapchat Spurned $3 Billion Acquisition Offer from Facebook

[nevergiveup]

If somebody comes and offers me $3 billion for my business, it's gone!

 

[Russ H]

Details of the offer? not cash right?

This is the first correct question asked on this thread.

Buy out offers are often structured with contingencies.

For example, the Wimpy gambit ("I'd gladly pay you Tuesday for a hamburger today")-- where a large buy out offer is nothing more than thin air, based on paying off the shareholders with $$$ *after* an IPO. If the IPO is not approved or does not generate enough revenue, the buy out is cleverly structured to pretty much take away ownership but give little in return.

Another possibility: Paying w/stock options. This sounds great, but you all know what can happen w/stock valuations. Today's $3B is tomorrow's penny stock. Value goes WAY down to peanuts.

If the VCs are less than $100 mil into this, they would have snapped up a cash offer of even $500 mil, and tendered partial ownership or continued incremental payments.

It's easy for a press release to say "3 billion dollars".

It's harder to find out the details.

Details are the difference between making money...

... and losing everything.

-Russ H.

PS Good to see you on here Rawr. I was here to do some housekeeping, back to building my biz. ;-)

 

[RHL]

Software is trendy. Snap Chat isn't a fuel for cars or a cure for cancer, it almost certainly will not exist in 15 years. I would have taken the $3B, even if it meant losing more, the risk of your property decreasing in value year to year is incredible.

 

[Unknown]

Not if you get 10

That's like saying that hitting a 17 in blackjack was the right move because you ended up with a 21. It was still the wrong move. You just got lucky.

 

[brandonrush]

I just read this article a few mins ago too. I really can't believe it. There is huge risk that valuations could go down,users could go down..especially since most of their users are teens that are fickle and changing the services they use all the time.

The guy is 23...he could sell and do nothing or start any type of business he wants.

This happened with Digg. Digg was once valued at $200,000,000 with offers on the table and he refused. Last I heard the site was worth about $500k.

 

[Vick]

personally i dont even know what sanpchat is. and i dont care.

but it's stupid to turn down 3 billion.

some people have no idea how much 1 billion actually is.

1 Billion is $1,000 a DAY for 3,000 YEARS.

sooo

3 Billiion is $1,000 a DAY for 9,000 YEARS.

 

[Simon Ashari]

I remember thinking the owners of twitter were idiots for turning down $500 million. As of me typing this, they have a $38.1b market cap. Not bad.

Obviously in this case, you want to sell as near the top as possible but before the bubble bursts (which it eventually will).

Companies with no revenues and limited options to create future revenue are not worth billions.

 

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[rkmalo1]

Personally, I'd take the offer. No question.

However, I know they have raised a TON of money, so I'm sure the VC's are pressuring for more and they haven't even made money yet (so there is potential, possibly).

Groupon was probably moronic when they turned down Google's offer of $6 billion years ago, Myspace was smart to take $580 million when they did, Facebook was smart to turn down Yahoo's offer of $1 billion in 2006. YouTube selling to Google for $1.65 billion - I don't know.

It's the gamble these companies take. I guess it's a matter of whether or not the founders want to continue as a stand alone company. In this case, it sounds like they are holding out for more - not the decision I would make with this company. But what do I know..

 

[Unknown]

I don't care how much they get in the end. Turning down $3 billion was stupid.

 

[AubreyJ]

SAD and GREEDY

http://www.forbes.com/sites/jeffber...worth-164-million-sold-to-betaworks-for-500k/

Pigs get fat, Hogs get slaughtered.

I didn't realize Digg was ever valued at 164 million, but for it to go to that valuation to a valuation of 500k in just 4 years is absolutely insane. I'd be kicking myself for the rest of my life if I was the CEO of Digg

Personally, I don't really get what the big deal is about snapchat- I use it, but only because almost all of my close friends use it, and it is a good way to send photos back and forth with my sister who lives in London. But I don't really get why it is so popular

 

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[PopEmersen]

Passing up $3 billion hoping to get more before people stop using your app and then getting more is pure luck.

How do you know he was hoping? He's the CEO of a growing intl platform, he's had VC funding for a while, i don't think its a stretch to say he knew his business was worth more than 3 billion to other parties. You're making it seem like the lottery which it isn't. It's a calculated decision by a business owner.

 

[Formless]

I am not snapchat's founder.

But if I was, I would take the money and get the F*ck out, expecting to watch the empire burn within a year.

Who knows though. Who knows. It could burst. Or it could grow to $6bn. This will be interesting to watch.

 

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[Vick]

However, I know they have raised a TON of money, so I'm sure the VC's are pressuring for more and they haven't even made money yet (so there is potential, possibly).

sorry maybe im not gettin this.

are you saying that it cost SnapChat 3 Billion dollars up to this point?

 

[whiteeclipse]

SnapChat is not even profitable, take the 3 billion pay off the VC's and start your next startup venture.

FaceBook is just worried they are losing teens to SnapChat.

 

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[Rickson9]

One of the reasons the offer was turned down.

Industry People Are Whispering That Kevin Systrom Blew It Selling Instagram For $1 Billion
In spring 2012, Facebook CEO Mark Zuckerberg spent a long weekend with Instagram CEO Kevin Systrom. After three days of talks, the pair agreed that Facebook would buy Instagram for ~$1 billion.

It was an amazing story. Instagram was only two years old. It had no revenues.

​

Now, 18 months later, industry people are starting to believe that Systrom was wrong to accept that deal.They believe that if Instagram had stayed an independent company, it could be worth between $5 billion and $15 billion today.

This morning, the New York Times's Jenna Wortham reported that venture capital firm Benchmark was "disappointed when Instagram’s founders decided to sell to Facebook for $1 billion last year."

Wortham says this disappointment was a big reason why Benchmark pushed...Snapchat, to reject an all-cash $3 billion offer from Facebook.

http://www.businessinsider.com/indu...ew-it-selling-instagram-for-1-billion-2013-11

 

[dknise]

Sending a picture of a coffee? I'd defriend that a**hole friend.


I've recently got on the service. Noise doesn't begin to describe the stuff people send, and when it is from pretty girls, it's even worse.

Where's your apartment?? I'll call for help to come break the chains from your social introversion.

 

[Rickson9]

How SnapChat Plans To Make Money
Last week, news broke that a ~2.5 year old company called Snapchat had rejected an all-cash $3 billion takeover offer from Facebook.

Predictably, the cat-calls and howls of indignation began.

Snapchat and its investors were obviously delusional idiots, Twitter pundits agreed. And arrogant! How else could they pass on a crazy offer from a "desperate" Facebook? Snapchat doesn't even have revenue. Even a one billion dollar offer for a company like that was "insane," let alone a three billion-dollar offer. If anyone needed confirmation that we're right back in a "tech bubble," this was it.

Well, as we pointed out last week, this insta-consensus around startling valuations is nothing new in the tech world. People said exactly the same thing when the revenue-less Facebook was first valued at tens of millions of dollars. Then they said it again when the still revenue-less Facebook was valued at hundreds of millions. And then billions. And then tens of billions. And they said the same thing when Twitter was first valued at tens of millions... And Pinterest. And Google. And Amazon. And, basically, every other successful Internet company that has burst on to the scene and grown rapidly over the past 20 years.
http://www.businessinsider.com/how-snapchat-will-make-money-2013-11



From my experience as an investor, with regards to being being quick to judgement or being quick to research, I'm not saying that the consensus is wrong, I'm just saying that the latter has served me better than the former.

Keep in mind that everybody told me that I was being stupid to buy stock after the 2002 tech wreck, and 2008 financial crisis for 40% off and that I was insane to buy Phoenix, AZ property in 2010 for $50 a sq ft.

This is not an endorsement of SnapChat, technology or investing, but my own personal opinion.

 

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[RHL]

I still think that if you're that young, you should get out when it's on the table. Invest, begin again, do whatever. 3 Billion is a brand new, fully loaded 911 Turbo S every single day for the next 50 years.

 

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[avispa]

Remember guys, MJ also sold his website, and it crashed and lost value. Later he re-bought it, and fixed the damages. While the people wasted money on ''fancy water coolers'' he spent time and blood building what he cared for.


And that is the question. Is what you made worth the money? Should you hand the reigns to that prize horse you hand fed as a young mare, so they can make a hamburger?


Is the money you will be paid worth it to you. To give up what you created?


So it's not about the money. Its about the passion. If I personally built something worth three million, I would not sell it. I would monetize it, to make money, but I would not give away what I created.. and watch it burn.

and to the person who built snapchat? The Event wasn't worth selling, because the process meant more.

I say good for him, for turning down a big hit.

 

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[exige]

I don't understand. Snapchat turned down $3B so Facebook would offer more money to another company?

They are holding out for a similarly lucrative offer.

 

[exige]

I believe their "similiarly lucrative offer" was the $3B one. Do you honestly believe Whatsapp is worth 1/3 of what Ford is? Really?

Probably not, but I'm probably getting too old to understand it at this point. I didn't even know what Whatsapp was until I read this I looked at it, and I have no use for it. : shrug :

 

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[SJVC]

Maybe we will have to eat our words...

Still, once you get past a certain point, how is an extra 1bn, 2bn or 3bn going to change your life?

 

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[tafy]

Personally, I don't really get what the big deal is about snapchat- I use it, but only because almost all of my close friends use it, and it is a good way to send photos back and forth with my sister who lives in London. But I don't really get why it is so popular

Because everyone uses it and its good, thats all you need to be very valuable

 

[Unknown]

Personally, I don't really get what the big deal is about snapchat- I use it, but only because almost all of my close friends use it, and it is a good way to send photos back and forth with my sister who lives in London. But I don't really get why it is so popular

I don't get it either. I'm still trying to figure out why people like Instagram so much.

 

[PopEmersen]

I don't care how much they get in the end. Turning down $3 billion was stupid.

Not if you get 10

 

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[PopEmersen]

That's like saying that hitting a 17 in blackjack was the right move because you ended up with a 21. It was still the wrong move. You just got lucky.

But this isn't luck of the draw gambling, this is an actual business that was created and followed a value creating process to lead to an event where they choose the outcome. You don't choose how much you win in gambling, that's luck. Creating a business and selling it is not luck.

 

[Unknown]

But this isn't luck of the draw gambling, this is an actual business that was created and followed a value creating process to lead to an event where they choose the outcome. You don't choose how much you win in gambling, that's luck. Creating a business and selling it is not luck.

Passing up $3 billion hoping to get more before people stop using your app and then getting more is pure luck.

 

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[Unknown]

This is pointless. I think I'm right, and you think you're right so there's no point debating it.

 

[Bouncing Soul]

There are news about Snapchat: new $10 billion offer:


Source: http://www.bloomberg.com/news/2014-...looks-smart-as-alibaba-weighs-investment.html

This is not an offer, it is the biz valuation created as part of their next round of funding.

 

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[Angus]

Maybe we will have to eat our words...

Still, once you get past a certain point, how is an extra 1bn, 2bn or 3bn going to change your life?

how weak is that logic?
it's like saying you don't need squats if you deadlift and bench press. why would you train legs when your upper body is hot?

 

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