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Despite its massive user base, Telegram has yet to break even, raising concerns about its long-term viability.
Telegram, a popular social media messaging app used globally, has encountered a serious setback in its plans for an Initial Public Offering (IPO). The company, which had hinted at going public by 2026, is now facing obstacles after its CEO Pavel Durov was arrested in France on Saturday, August 24.
According to a Financial Times report, this legal development could potentially delay or even derail the company’s ambitions to list on the stock market, as financial and legal pressures mount.
Telegram’s IPO Plans Thrown into Uncertainty
Telegram’s IPO ambitions had been seen as part of Durov’s long-term plan to make the platform self-sustaining. In recent years, he has focused on growing the company’s revenue through subscription services and advertising. However, despite Telegram boasting over 950 million active users globally, profitability has been elusive.
In 2023, the company generated $342 million in revenue, but after tax, it recorded a net loss of $173 million. Durov, who rejected offers valuing Telegram at over $30 billion, was determined to steer the company toward a successful IPO. However, recent events have cast significant doubt on whether this goal can still be achieved.
The Russian-born billionaire was detained in France following allegations that the platform has failed to comply with law enforcement. He was charged with crimes related to facilitating criminal activities, including cyberbullying and child exploitation on Telegram.
Earlier this week, Durov was released on bail set at €5 million. However, he is barred from leaving France with a mandatory police visit twice a week.
Following the arrest of the Telegram boss last weekend, French authorities have intensified their investigation into the company’s operations, which they claim have allowed harmful content to proliferate unchecked due to the app’s robust privacy protections.
Bondholders Suffer as Telegram’s Financial Health Worsens
The ongoing legal challenges have shaken Telegram’s financial standing, causing significant losses for bondholders in the past few days. After news of Durov’s arrest, Telegram’s bond prices plummeted drastically.
Before the arrest, the bonds were trading at about 96 cents on the dollar, but they have since dropped to 87 cents. On the other hand, bond yields have climbed above 16%, reflecting growing concerns about the company’s financial stability
Over the years, Telegram has tried to maintain its financial standing. The company raised approximately $2.4 billion in debt financing, with a significant portion coming from a $1 billion bond offering in 2021 that included Abu Dhabi state funds as investors.
In early 2024, the company managed to raise an additional $330 million in an oversubscribed bond offering, but this financial cushion now appears threatened by the uncertainties surrounding Durov’s legal battle and the potential delays in the company’s IPO.
Telegram May Face Challenges in Revenue Growth
In addition to the potential delayed IPO, Durov’s vision of expanding Telegram through self-sustaining revenue sources is being tested by the company’s financial performance. Despite its massive user base, Telegram has yet to break even, raising concerns about its long-term viability.
Analysts warn that the ongoing legal issues could scare away advertisers, who may hesitate to promote their brands on a platform linked to criminal allegations.
They also fear that without a broad range of advertisers, Telegram may have to rely on niche markets like crypto ads, limiting its revenue potential.
Disclaimer: Coinspeaker is committed to providing unbiased and transparent reporting. This article aims to deliver accurate and timely information but should not be taken as financial or investment advice. Since market conditions can change rapidly, we encourage you to verify information on your own and consult with a professional before making any decisions based on this content.
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Chimamanda is a crypto enthusiast and experienced writer focusing on the dynamic world of cryptocurrencies. She joined the industry in 2019 and has since developed an interest in the emerging economy. She combines her passion for blockchain technology with her love for travel and food, bringing a fresh and engaging perspective to her work.
