The Telegram messaging app would make an exciting IPO

I am sure you have all had a friend trying to convince you to migrate to Telegram. After rumors the company is about to step into public markets, we thought it would be interesting to explore Telegram’s story and recent success.

Key takeaways on Telegram

  • Telegram is an app that provides end-to-end encrypted messaging, voice and video calls.
  • In January 2021, Telegram became the number one most downloaded mobile application in the world, with over 63 million downloads worldwide.
  • The company is said to be about to enter public markets by issuing $1 billion in convertible bonds through private placement.
  • Although it was reported safer than WhatsApp, it appears that their system is (or was) not always up to date with their privacy promises.
  • Pavel Durov, Telegram’s founder, has an amazing story, fighting against the Kremlin to keep control of his app. Telegram is now banned in Russia.

 

What is Telegram?

Telegram is an instant messaging platform, much like WhatsApp or Facebook messenger. Launched in 2013, the app provides end-to-end encrypted messaging, voice and video calls. The cloud chats are encrypted between the app and the servers, which means that third-parties on the network cannot access the transferred data.

Users can exchange messages, make voice and video calls, share images and documents, their location, contacts, and even music files. One crucial element differentiates it from other apps like WhatsApp: privacy. Or so people thought.

 

A massive number of downloads for Telegram

As of Q1 2021, the app had over 500 million active users, and has been growing at an annual growth rate of 40%+ for the last 7 years. Part of this tremendous growth happened when WhatsApp decided to change its privacy policy, making people flee their app to search for better alternatives. Telegram quickly imposed itself as one of those alternatives. Not long after, In January, Telegram became the number one most downloaded mobile application in the world, with over 63 million downloads worldwide.

 

The top apps by downloads for January 2021

The top apps by downloads for January 2021

 

Number of monthly Telegram users between August 2013 and January 2021

Number of monthly Telegram users between August 2013 and January 2021

 

The next step for Telegram is to now monetize the platform with its own ad platform for public one-to-many channels. They insist on keeping it user-friendly, to respect privacy and to allow them to cover the costs of servers and traffic.

They also plan to monetize other services such as premium stickers, with a portion of the price going back to the original artist. The goal is to build a small ecosystem where small businesses and artists can thrive by augmenting the user experience.

One element is crucial to them: not to do like WhatsApp and sell the company. They want Telegram to stay independent, where user’s privacy is respected, and high quality is ensured.

 

Is Telegram about to enter public markets?

There are rumors that Telegram is looking to raise $1 billion in the bond market, opening investment possibilities in the company. According to the Russian press, these would be convertible bonds through private placement.

The first information about this bond story was from the business daily Kommersant in Moscow, which reported that bondholders would have the possibility to convert their bonds into equities under the condition that Telegram would go through an IPO in the next 5 years.

Although we do not have any information about the timing of any IPO – and the company obviously declined to comment – Telegram turning to the bond market for funds clearly shows its importance in the messaging app sector. In the end, turning to the debt market could be a great way to access the funds necessary to implement a monetization strategy while maintaining 100% ownership and independence. It would also make an interesting investment for investors interested by entering the instant messaging thematic. 

 

Is Telegram safer than WhatsApp or Signal?

Well, multiple reports have questioned this statement. Messages are encrypted between your device and Telegram’s cloud, but Telegram still holds all the keys to any of your data stored on its cloud.

Telegram refuses to talk about this issue on its security architecture. The only way to ensure total privacy is end-to-end encryption, but this only works between two individuals, and it bypasses the platform’s cloud storage.

Further issues were detected, as for example the fact that “self-destructed” and deleted conversation and files could always be found on their servers. Encrypted or not, it did not make a difference. These issues were reported to be patched in the latest version in February, but still, the “safer than everything else” promise is now being doubted.

Tommy Mysk, one of the researchers who outed the iOS clipboard vulnerability that caused TikTok such bad press, warns that Telegram sometimes mixes encrypted channels with non-crypted ones, making it a little confusing for some users who will not be able to tell the different. He recommends using Signal for the best end-to-end security.

Telegram is also the story of David and Goliath

Pavel Durov, the founder of Telegram, is a legend in Russia. He is almost seen as a national hero, for having stood up against the Russian intelligence agencies. If Putin is Darth Vader, Durov is Luke.

As a result of this conflict, Telegram got banned from Russia, although many Russians use the app, thanks to VPNs.

Durov also managed to resist an aggressive take-over from the Kremlin, as an investment vehicle called UCP managed to control 48% of Durov’s internet company Vkontakte. UCP was trying to take an app in development from Durov’s hands: Telegram. Durov was kicked out of his own company.

Thankfully, a businessman named Alisher Usmanov, a metals and telecoms magnate, provided legal support to Durov in his fight to regain his company. The outcomes could have been tragic, with Telegram falling into the hands of someone other than its creator. In the end, Durov sold his share to Usmanov’s, Ivan Tavrin, and the two businessmen stroke a deal with UCP to protect Durov and his ownership of Telegram.

Today, Telegram is one of the most popular messaging apps in the world, and yet, not many people know about the difficulties its founder went through.

The history, the concept of not selling user’s data, might – if mixed with a successful monetization plan – make the company’s bond oversubscribed instantly. The same goes for an IPO if it comes to happen. Let us see what Telegram has to offer.

 

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If Telegram’s IPO does happen, what effect will it have on other messaging stocks?

This really depends on the success of the IPO, but with Facebook's WhatsApp and Messenger, Snapchat that were becoming almost monopolies, it is possible that a flow of users migrating to alternatives likes Telegram or Signal might damage their public image and decrease their stock price, making them less worthy investments.

The fact that data privacy and protection have become a subject of high interest also does not help these stocks.

However, investments in companies like Tencent Holdings (owners of Wechat) are less likely to be affected, as their users do not overlap so much with Facebook or Snapchat, which are unavailable in China.

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