The company must pay off its debts with investors who invested in the failed TON blockchain platform.
In February, Kommersant reported on the company’s plans to place $1 billion in bonds for a narrow circle of investors. Investors are previously promised an income of 7-8% of the debt amount, the publication wrote.
In December 2020, the messenger sent reports to potential bond buyers, in which it spoke about the problems, plans and financial indicators for 2018-2020. The documents were reviewed by VTimes, and their authenticity was confirmed by one of the mailing list recipients.
Telegram shared with potential investors its audited consolidated financial statements for 2018 and 2019 and its unaudited financial statements for the first six months of 2020.
In 2019, the company’s loss was $150.9 million, in 2018 – $172.7 million, the document says. Messenger did not receive revenue from operating activities, but in the first half of 2020, it made a profit of $151.3 million.
The company received a one-time income of $303 million and became profitable thanks to the revaluation of debts to investors, explains Telegram. Of the money received, the company spent $87.7 million on the development and support of projects, and $50.2 million for administrative and financial purposes.
The company had negative equity for all 2.5 years: a deficit of $172 million in the first half of 2020, $323.5 million in 2019, and $172.7 million in 2018. Liabilities exceeded assets by $418 million and $245 million, respectively.
Auditors from the Russian office of PwC noted financial risks, as well as high uncertainty — it is unclear whether the company will be able to continue its continuous operations with such indicators, writes VTimes.
Part of the money raised from the placement of bonds, the company will direct to quickly cover debts to investors. Telegram will use the rest of the money to continue its activities.
By mid-2020, $625.7 million was owed by the group on open credit lines — Telegram must repay them by April 30, 2021. According to the document, $684 million of the $1 billion raised can be used to repay debts.
The company had debts to investors due to the failure of the launch of the TON blockchain platform and the Gram cryptocurrency: in 2018, $1.75 billion was raised for the project, but due to claims from the US Securities Commission, the project was disrupted.
Telegram was supposed to pay back 72% of the investment, the documents say. By December, the company returned $770 million, refinanced about $443 million in loans, and did not pay off $6 million, writes VTimes.
Since May 2020, Telegram has entered into loan agreements with 65 investors for $448 million at approximately 52.77% per annum. It turns out that investors should receive 110% of the amount they invested in 2018 — about $626 million by mid-December 2020.
What will the remaining money be used for
The group has ongoing significant expenses, which will be used for the money remaining after the repayment of debts. The majority-35% – will go to hardware and servers — the company does not want to depend on third-party suppliers.
25% of the money will be spent on the technology for verifying users — SMS during registration. 15% will be spent on employee benefits and rental of space in data centers, and 5% – on Internet traffic providers and technical support.
The company will place the bonds maturing in 2026 on the international market of the London Stock Exchange. They will be issued by the parent Telegram Group Inc., which at the time of the release of the documents has only one share, which belongs to Pavel Durov, writes VTimes. It follows from the documents that the company also has a maximum of 50,000 declared shares (without the designation of the nominal value and class of shares).
The company has already announced some plans to monetize the messenger, for example, an advertising platform. Until 2023, Telegram plans to:
Implement advertising posts in Telegram channels — by 2025, every tenth post in the messenger can be an advertisement.
Sell premium stickers on a separate marketplace.
Integrate games into chats — share the revenue with third-party game developers. Create additional services for corporate clients. In 2021-2022, the company plans to invest in the organization of a separate workspace inside the messenger.
To share the proceeds with the administrators groups.
Add short videos in the “Stories” format.
Launch a sales platform-a marketplace within the social network, in which Telegram will offer sellers to place product catalogs with the possibility of payment. The company does not plan to charge any commission for sales yet.
The company warns investors that Telegram has a short business history and a new business model, which makes it difficult to predict its future results, and monetization strategies may not work.
Telegram is considering an IPO on a major international exchange — then bondholders will have the right to convert them into shares at a discount of 10% to the placement price, the document says.
A representative of PwC did not comment on the data to the publication, VTimes sent a request to Telegram vice president Ilya Perekopsky