The simple reason why Snapchat is going public

Snapchat has reportedly filed for an IPO.

And the reason, all else considered, is simple: to pay shareholders.

Reuters reported late Tuesday that the social media platform — now known as Snap Inc. — has confidentially filed to go public in a deal that could value the company as high as $25 billion. Snap’s debut could come as soon as March.

Recall that Facebook tried to buy the company for $3 billion back in 2013 and was famously turned down. If Snap debuts at a valuation eight times this amount, well, there’s no debate over whether this was the right call.

Eventually, though, at a certain scale companies must find their way to public markets in order to accomplish the simple goal of paying shareholders. Or rather, the company’s investors need to pay their shareholders.

“At some point, all the private money, the financial sponsors, that are in [a private company], are going to have to bring their entities to public markets so that they can pay their shareholders,” said Matt DeSalvo, head of US equities at Mizuho Securities.

DeSalvo noted, of course, that investors will pick their spots on when to go public, as private investment funds — whether its private equity or venture capital — have a certain window inside of which to return capital to their investors.

Additionally, companies could want to reward their own employees who have been paid with a considerable mix of cash and stock. When private companies raise money there is sometimes an ability for longer-term employees with vested options to cash out. But as companies get larger, the ability for a private fundraise to meet the liquidity needed to reward shareholding employees dwindles.

“Ultimately, they all go public,” DeSalvo said.

The only question, really, is when.

To date, 2016 has been a notably slow year for initial public offerings, with only 73 companies going public through the first three quarter of the year, the lowest since 2009, with proceeds totaling just $13.1 billion, according to data from FactSet.

Following the election of Donald Trump, markets have been in rally mode and business optimism — at least as the Wall Street analyst community sees it — should improve from here.

The Wall Street Journal reported Tuesday, however, that Snap made its IPO filing before Trump’s election and this outcome will not change its plans. From a sentiment standpoint it seems that, if anything, this event should’ve improved Snap’s outlook. But either way.

Details on what exactly investors get for a slice of Snap will come in time once its financials are made public.

What we know now is that, as of late September Snapchat had 60 million daily users in the US and Canada. The company is also projected to bring in about $360 million in revenue this year, according to reports.

Snapchat, in many respects, is the advertising platform brands feel they must be on to reach a millennial audience. And a research report from RBC in October said about 50% of marketers had expressed interest in advertising on the platform.

Snapchat is mobile-first. And Snapchat offers users and advertisers something that isn’t merely a Web-based facsimile of existing media — online news is just a newspaper online, streaming video is just TV online — it gives up to 10 seconds of someone’s time.

Then it’s gone.

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Myles Udland is a writer at Yahoo Finance.

Read more from Myles here; follow him on Twitter @MylesUdland