Selling exploiting discord that could be worth more than $ 10 billion

Discord is undergoing a sales process that could result in the purchase of the communications and cha5t platform for well over $ 10 billion, GamesBeat found.

Two sources familiar with the matter said that Discord is exploring its put options after the interest of several parties wishing to buy the company. And a source said the company has signed an exclusive acquisition discussion with one of the parties, which means it is in final negotiations on a sale. This news comes after Discord raised $ 140 million in December in a valuation of $ 7 billion (based on data found by the Prime Unicorn Index).

Discord is considered a strategic asset, as it connects game companies with their biggest fans in audio and text chat communities. But whether it will sell or not will depend on Discord CEO Jason Citron, who will have to decide whether the company can better fulfill its mission as part of another company.

“I know they are in active discussions with some selected parties,” said a source. “The market is in a state where they could command billions of dollars of double digits.”

A Discord spokesman said he declined to comment on rumors or speculation. Many things can happen that can change the company’s plans. But Discord is at stake, according to our sources.

The gaming market is crazy about plans and calculations now. If Roblox is worth $ 42 billion in its public offering, it is thought, then this or that must be worth a lot. Roblox had a successful public offering on March 10 that leaves the window open for other companies that are trying to maximize its value, whether through acquisitions or the stock market. Disagreement can be a test of whether another company with communications technology may or may not follow Roblox’s recent steps, and rumors about a possible IPO often circulate.

Although Discord has grown dramatically and has over 140 million active users per month, it is still in a growth phase and its finances are not spectacular now. That means it may be too early for the company to try to go public, the source said. The Wall Street Journal reported earlier this month that in 2020 Discord generated $ 130 million in revenue, compared to nearly $ 45 million in 2019. In that sense, Discord was similar to many other gaming companies that saw huge gains during the pandemic, when everyone was in prison.

But Discord acknowledged in the same article that it is not yet profitable. In comparison, Playtika, which went public in January with a valuation of $ 11.4 billion, made a profit of $ 2.37 billion in revenue from 2020. Playtika earns this money based on in-app purchases in games free, and many Discord players can survive without the premium subscription.

A source I spoke with said that Discord hired Qatalyst Partners to evaluate potential suitors. Qatalyst, which Silicon Valley negotiator Frank Quatrone (CEO) founded and CEO George Boutros runs, managed the process when Discord went on sale in 2018. At that time, the company decided not to accept offers from anyone. Qatalyst declined to comment.

Negotiations in 2018 were constant, with possible acquisition prices ranging from $ 2 billion to $ 6 billion. But buyers often wanted Discord to do something it didn’t want to do, like embrace advertising. Discord also felt that its values ​​were better protected at that time, remaining independent. This means that it is possible that the current sales process will not result in the sale of Discord.

“It is difficult to tell the difference between a serious acquisition attempt and a fishing expedition,” said a source, who asked not to be identified. “It can fall apart at any time. The reality is that the company is doing very well. I see no reason to want to sell. They seem to be completely in control of their destiny now. “

Any potential buyer with more than $ 10 billion on hand to buy Discord is likely to be a big game company, but the suitor is more likely to be the owner of a platform like Microsoft, Amazon, Twitter or Google. Some gaming companies are concerned that Discord, which plays key roles in connecting game studios and publishers with their communities, will be acquired by a party that would be interested in only one of those communities. Microsoft did not respond to a request for comment.

Acquiring Discord would transform the company from an independent company that serves all games and other communities to one that serves a specific parent company, much like what happened with Amazon acquired Twitch or Microsoft acquired the (now defunct) Mixer . Citron’s previous company, OpenFeint, was successful in the sense that it was acquired by Gree for $ 104 million in 2011. But many users complained about this change of ownership and Gree ended up closing it. A similar result with Discord is not likely to be satisfactory for Citron.

Any business would likely have a higher valuation than the $ 7 billion in December, as sales in the secondary market – where employees and other shareholders sell their stock options to others in order to obtain liquidity (instant money) – suggest a price over $ 10 billion. If there is a bidding war for Discord, it is easy to believe that its price could go up even further, our source said. A second source familiar with the context of the possible sale said he would not be surprised if the bid was worth more than $ 20 billion.

Rainmaker Securities noted that secondary market shares have risen fivefold in the past 12 months. And Rainmaker said his latest offer is $ 450 per share and an estimated valuation of $ 11.24 billion. But some negotiations have reached valuation levels of up to $ 14 billion. This is a small but important tea leaf about the company’s value.

The most recent investors who bought at Discord include Greenoaks Capital and Index Ventures. Previous investors include Greylock, IVP, Spark Capital, Tencent and Benchmark. If there is pressure on Citron to sell, it will likely come from early investors.

To date, Discord has raised $ 480 million. The company monetizes its users by having them update their Nitro subscription service, but many use it for free. Along the way, many people encouraged Discord to adopt advertising, but Citron avoided it because he thought it would hurt the user experience. It turns out that going beyond players to other communities has helped the company to grow and increase its subscription revenue base.

Discord’s fame is that it has high-quality audio, but it has competition from the Clubhouse, which raised $ 100 million for a $ 1 billion valuation in a round led by Andreessen Horowitz. Owning Discord would be a counterpoint to the Clubhouse, and that can make it attractive to users like Twitter and Facebook, who are both threatened by the Clubhouse.

Eros Resmini, Stanislav Vishnevskiy and Citron founded Discord in 2015. They started their Hammer & Chisel game studio to try to make a multiplayer online battle arena social game (MOBA). But while the game did not work, the communications service did. I met Citron and Resmini at a restaurant in San Mateo, California, when they told me about Discord.

It is now extremely popular for purposes like sports communications, gaming community chat and other functions. The company has more than 350 employees.