Last September, Snapchat employees read a report about a leaked commercial touting a new product—a pair of glasses for shooting videos. They felt emboldened to ask their bosses: Are these Spectacles glasses really from us? It seemed plausible. Paparazzi had photographed Chief Executive Officer Evan Spiegel wearing similar frames months earlier.
But after the inquiries, employees got an e-mail, clamping down on the chatter, according to people familiar with the matter. You may have seen reports about a product that we may or may not be working on, it said. Don’t talk about it.
Hours later, Snapchat publicly announced that the glasses were indeed real and part of a new strategy to define itself as a “camera company.” The company’s new name was Snap Inc. Many employees read about this for the first time in the news.
That’s the way things work at Snap, an ultra-secretive organization where employees are unlikely to know the goals or strategy of other teams. The only person who knows the full picture of the company’s next steps is Spiegel, whose prickly opinions about privacy have propelled Snap’s trajectory—and its product, an app for sending disappearing messages. “Keeping secrets gives you space to change your mind, until you’re really sure that you’re right,” he wrote in a 2015 note to employees.
Those values will be tested in a planned March initial public offering, when Spiegel will take to the ultimate public stage to convince potential investors that the company has a long-term vision for growth, with a real plan to make more money and outmaneuver the competition. In an IPO, beyond providing financials, executives travel the country and internationally for a roadshow to explain their strategy.
Scrutiny has already caused pain. After Bloomberg News revealed specifics about Snap’s offering size and target market valuation of at least $25 billion, Snap executives scolded the IPO’s underwriters, assuming the bankers were responsible for the leaks, according to people familiar with the matter. Snap management threatened to cut some underwriters’ fees if confidential information continued to appear in the news without the company’s blessing, said the people, who declined to be named because they were not authorized to speak. Fees contingent on strict confidentiality is an unusual requirement, even in the hush-hush process of going public. A representative for Snap declined to comment, as did representatives for the lead underwriters, Morgan Stanley and Goldman Sachs Group Inc.
Snap executives have been reluctant to release any details they aren’t legally required to divulge, even to their earliest private investors. Wall Street analysts say they are getting frequent phone calls from their clients, asking for any introductions to management or detail about what’s in Snap’s proxy filing, which was filed confidentially under the Jumpstart Our Business Startups (JOBS) Act.
“Everyone’s kind of flying blind on this,” said James Cakmak, an analyst with Monness, Crespi, Hardt & Co.
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