Exclusive: Snap's secrecy frustrates banks' pursuit of IPO glory

Thu Feb 2, 2017 2:27am EST
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By Lauren Hirsch and Liana B. Baker

(Reuters) - Some investment banks seeking to be added as underwriters to Snapchat owner Snap Inc's initial public offering registration document have been denied access to review it before it is made public this week, according to people familiar with the matter.

The unusual move underscores Snap's relentless campaign to crack down on information leaks. For Wall Street banks, it pits their desire to appear on the front cover of this year's most high-profile IPO against their reluctance to have their names featured in a regulatory document they have not seen.

Snap's stance reinforces its reputation as one the world's most secretive companies. It made privacy its hallmark by developing an app that sends disappearing messages, before rebranding itself as a "camera" company making video recording glasses and visual effects for video taken by smartphones.

"I cannot imagine any other deal in which banks would let something like this happen," said Christopher Austin, an equity capital markets lawyer at Orrick Herrington & Sutcliffe LLP, who is not involved in Snap's IPO.

While Snap's lead IPO underwriters, Morgan Stanley and Goldman Sachs Group Inc, had an opportunity to review and draft the registration document, the more than 10 banks that have recently signed up as IPO co-managers, including Citigroup Inc and Royal Bank of Canada, have been told they cannot see it ahead of it becoming public, the sources said on Wednesday.

Instead, the Los Angeles-based company has organized meetings with teams of banks to answer their questions about the document, and has also made lawyers from the lead underwriters available, the sources added.

Typically, banks have "commitment committees" to review IPO registration documents before gaining internal permission to have their name included in a registration document. They usually seek assurances that disclosures on a company's business risks and accounting standards have been made properly.

"Commitment committees are there to keep bankers from making stupid mistakes, and to protect a bank's reputation," Austin said.   Continued...

A Snapchat sign hangs on the facade of the New York Stock Exchange (NYSE) in New York City, U.S., January 23, 2017.  REUTERS/Brendan McDermid