Discord Ends Talks With Microsoft, Will Focus On IPO

One month after we learned that Microsoft was in advanced talk to acquire chat startup Discord for $10 billion, the chat startup has halted talks to sell itself to potential suitors including Microsoft, the WSJ reported citing people familiar with the matter, as it resumes interest in a potential initial public offering down the line.

Microsoft’s reported consideration represented a 40% premium to Discord’s latest capital raising round in December when its valuation was said to reach $7 billion. Overall, the company has raised roughly $480 million, according to Crunchbase data. Investors include Greenoaks Capital, Greylock Partners and Index Ventures.

The Journal reports that Discord – which operates a free online platform for chatting by text, audio and video, and is especially beloved by gamers – fielded interest from at least three companies about a deal. In the end, Discord opted to stay independent at this time as it is doing well on its own.

In a move that could facilitate an IPO, Discord last month hired its first finance chief, Tomasz Marcinkowski, a former Pinterest Inc. executive. While Discord isn’t a videogame company, many of its users rely on it to communicate with each other while playing games, and several businesses with ties to the videogame industry have gone public in the past year, including developers Roblox Corp. and Playtika Holding Corp. , game-hardware maker Corsair Gaming Inc. and game-creation tool provider Unity Software Inc.

Roblox did a direct listing last month, shelving original plans to go the traditional IPO route, after the videogame company decided it was too difficult to determine the right price for its shares.

Microsoft, whose market cap is nearly $2 trillion, has been looking for acquisitions that would help it reach more consumers. Last summer, it explored a bid to purchase parts of the video-sharing app TikTok amid a high-profile geopolitical standoff prompted by the Trump administration.

A deal for Discord would have helped Microsoft expand its presence in social media beyond LinkedIn and what it has developed through its Xbox videogame business. Discord users say the platform offers more attractive features such as higher-quality audio than competing chat services, including even that of Xbox and Skype, which Microsoft also owns.

In addition to the unsuccessful TikTok talks last year, Microsoft gave up on Mixer, its videogame live-streaming service that struggled to compete with the likes of Amazon.com Inc.’s Twitch, Alphabet Inc.’s YouTube and Facebook Gaming.