According to a report from CNBC that references sources, mobile payments company Square Inc (SQ) is likely to price IPO below expectations.
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Square’s forthcoming IPO could have significant implications for the IPO market and for so-called unicorn companies that flaunt valuations north of $1 billion, according to one IPO expert.
With 323 million shares to be outstanding after the IPO, the offering values the San Francisco-based company at $2.9 billion – half the most recent valuation of $6 billion by private investors. The $9 share price also means that Square will have to issue millions of extra shares to its Series E investors under the terms of that fundraising deal. Square’s pricing – below its previous valuation – is one of many instances of valuations being written down among late-stage startups. But as an early and established player in a market that may top $140 billion in volume by 2019, Square may be well-positioned for patient investors.
Square will IPO Thursday morning, launching with a $9 a share price. The company fetched a $6 billion valuation in its latest financing.
Square, after pricing its IPO in the $11 – $13 range, didn’t even get that much enthusiasm from potential investors, and lowered its price.
The sky high private valuations in early venture capital rounds are now struggling to carry over to the public markets as skittish investors reassess new tech stocks. Once a rarity, there are now at least 91 in the USA alone, according to CB Insights.
And we now know a little more about how Square plans to evolve past its reliance on a plug-and-play card reader to succeed as a business moving forward.
Meanwhile, Square’s IPO is a highly anticipated move that’s being closely watched by investors and other Silicon Valley startups.
Those investors include at least two banks working on the IPO: J.P. Morgan Chase & Co. and Goldman Sachs Group Inc.
That figure, the analysts said, is in line with a few Internet companies but ahead of established payments companies such as Vantiv Inc. and Global Payments Inc.
Square also offers other services like its food delivery service Caviar and its cash advance service Square Capital.
A group of companies whose initial public offerings attracted wide attention over the past year have since seen their shares sputter, as Wall Street has been roiled by a surge in market volatility and wariness over expectations the U.S. Federal Reserve will hike interest rates, the first increase in nearly a decade.
Square itself is forecasting long-term future profit margin of 35% to 40% excluding interest, taxes, depreciation and amortization.
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“I think they still have a lot to prove”.
