Aug. 9 (Bloomberg) -- Snapchat Inc.’s fundraising discussions with Alibaba Group Holding Ltd. are over, according to people familiar with the matter, even as the startup prepares to sell a stake in itself by authorizing the issuance of new shares.
The Los Angeles-based startup, which makes a mobile application for ephemeral messages, had been in talks with investors including Alibaba for a financing round that would value the company at $10 billion, people with knowledge of the situation said last week. The conversations have ended and haven’t been active for some time, according to other people familiar with the matter, who asked not to be identified because the talks were private. Alibaba has left the door open to pick up discussions after it holds an initial public offering, one of the people said.
Snapchat is still taking steps to raise financing. In a corporate filing in Delaware on Aug. 4, Snapchat authorized 17.4 million shares of new preferred stock, an increase from the 1.2 million shares a month earlier. The shares are valued at a fraction of a cent, according to the filing. Snapchat, which is closely held, is incorporated in Delaware.
The amount of new shares is equivalent to about 3 percent of the company, according to Justin Byers, an analyst at VC Experts, a private-company research firm that provided the filing to Bloomberg News. The low price of the shares indicates they may be tied to another investment, such as an acquisition or IPO, he said.
“Typically when these documents are filed, the deal is done,” Byers said. “These are legal documents about changing the structure of their company.”
Mary Ritti, a spokeswoman for Snapchat, declined to comment. Jim Wilkinson, a spokesman for Alibaba, didn’t respond to a request for comment. The filing was reported by Forbes yesterday and the ending of the Alibaba talks was reported by Recode yesterday.
Snapchat, run by Chief Executive Officer Evan Spiegel, last year rebuffed a $3 billion acquisition offer from Facebook Inc.
Snapchat’s popularity has continued to grow, with people sending more than 700 million disappearing “snaps” a day and more than 500 million stories viewed daily, the company has said.
Snapchat said in May it was adding an option for users to chat with text, joining an increasingly crowded mobile-messaging market that also attracted Facebook. The social network agreed to pay about $19 billion for WhatsApp Inc. in February.
--With assistance from Serena Saitto in New York.