MSFT Microsoft Corporation

By Sarah E. Needleman and Cara Lombardo 

Chat startup Discord Inc. has halted talks to sell itself to potential suitors including Microsoft Corp., according to people familiar with the matter, as it resumes interest in a potential initial public offering down the line.

Microsoft had been in advanced talks to acquire Discord for at least $10 billion, The Wall Street Journal reported last month. Those talks ended without a deal, though it is possible they could be rekindled in the future, some of the people said.

Microsoft, whose market value Tuesday stood at nearly $2 trillion, has been on the hunt 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.

Discord fielded interest from at least three companies about a deal, some of the people said. They said Discord is performing well and prefers to stay independent at this time.

San Francisco-based Discord operates a free online platform for chatting by text, audio and video. Especially beloved by gamers, its popularity has surged since the pandemic took hold as people turned to it as a safe way to connect with friends and family.

Discord said it doubled its monthly user base last year to about 140 million as daily life moved online in the coronavirus pandemic. The company generated $130 million in revenue in 2020, up from nearly $45 million in 2019, though it still isn't profitable, the Journal has reported.

Launched in 2015, Discord doubled its valuation to $7 billion in a December funding round. Overall, the company has raised roughly $480 million, according to Crunchbase data. Investors include Greenoaks Capital, Greylock Partners and Index Ventures.

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.

A deal for Discord would have helped Microsoft expand its presence in social media beyond LinkedIn Corp. 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.

The technology giant has made several acquisitions in recent years, most recently its proposed deal for Nuance Communications Inc. It spent $7.5 billion earlier this year on its purchase of videogame company ZeniMax Media Inc., $7.5 billion on software-development platform GitHub Inc. in 2018 and $26.6 billion on LinkedIn in 2016.

Write to Sarah E. Needleman at sarah.needleman@wsj.com and Cara Lombardo at cara.lombardo@wsj.com

(END) Dow Jones Newswires

April 20, 2021 15:34 ET (19:34 GMT)

Copyright (c) 2021 Dow Jones & Company, Inc.