NEW YORK (TheStreet) -- Today we heard the rumor that the three-year-old Snapchat is worth roughly $10 billion dollars. Seems staggering, no? In a vacuum, yes, but in the current state of the market, there's little surprise in this latest round valuation.
Kleiner Perkins, one of the most respected long-term investors in the Valley, is reported to be picking up about $20 million in shares from the instant photo messaging service at a valuation of $10 billion. This report comes from the Wall Street Journal's Evelyn Rusli and Doug Macmillan.
The number is jaw-dropping at first glance, but the size of the add-on is what seems most curious in the situation. The company just serviced a round earlier this year from DST Global for an undisclosed amount, according to WSJ. That round valued the company at $7 billion. This time last year, Snapchat underwent an $80 million Series B, which valued the company at only $2 billion.
How quickly can you outpace investment logic?
With at least seven separate venture capital firms involved in the company already, and a large handful of both private investors and public companies circling around the idea of a buyout, it makes sense that Kleiner would take a bite while the food's on the table.
Snapping up a $20 million buy in would give Kleiner well under 1% of the company, which is run by 24 year-old Evan Spiegel. In fact, it would give Kleiner just a 0.2% holding. But more than just the money, Kleiner is giving close friends over at Benchmark Capital the golden stamp of approval.
Many large companies -- like Twitter (TWTR) - Get Report , Zynga (ZNGA) - Get Report and Chegg (CHGG) - Get Report -- have all received late-stage rounds from Kleiner prior to going public. If indeed that is the exit strategy for this "unicorn" company, it's staying well within the formulaic parameters of what a underwriter like Morgan Stanley (MS) - Get Report or Goldman Sachs (GS) - Get Report might be looking for.
WhatsApp, by comparison, reported 600 million users prior to being bought by Facebook (FB) - Get Report for $19 billion. Twitter has about 271 million monthly users and a market cap of almost $30 billion.
So Snapchat is slightly frothy, but not a complete right-fielder.
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At the time of publication, the author held no positions in any of the stocks mentioned.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
TheStreet Ratings team rates FACEBOOK INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:
"We rate FACEBOOK INC (FB) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures and impressive record of earnings per share growth. However, as a counter to these strengths, we find that the stock itself is trading at a premium valuation."
- You can view the full analysis from the report here: FB Ratings Report