It is expected that shares of the company will start trading on Thursday on the NY Stock Exchange under the symbol ‘SQ.’ and the offering is expected to close on November 24.
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The San Francisco-based firm earlier this month set a price range of $11 to $13 per share, well below the $15.46 investors paid in Square’s most recent private financing round past year. This same problem could keep Dropbox and other tech startups from IPOing anytime soon.
Square’s shares rose 24.4 percent in their market debut on Thursday, valuing the company at $3.62 billion.
This steep decline in public valuation of Square has send chills down the tech unicorns. Despite the company’s problems, both the stakes in Twitter and Square have made Jack Dorsey a rich man. His stake in Twitter is worth $560 million and his stake in Square in now worth $640 million.
The developer of a free software app that combines with a small card reader to turn mobile devices into point-of-sale systems claimed in the filing that the foundation of its business model “is the millions of sellers processing payments with Square”.
“In an IPO market where hype and buzz was a far greater driver of IPO value than fundamentals, Square might have done very well”.
Other technology startups, including Box Inc., have priced IPOs this year below where the companies had been valued by private investors.
This cut in valuation is a wake-up call for the tech industry which has a knack of overvaluing startups and industry experts have been increasingly vocal for Silicon Valley to be more realistic about valuation.
But Square, a payments service once considered the darling of Silicon Valley, and Tinder, arguably the hottest dating service around, were clearly not prepared for the lackluster reaction they’d receive from investors as they tried to go public this week.
Competition is also intensifying in the mobile payments market, with Apple Inc launching its Apple Pay service, Amazon.com Inc exploring in-store payments, and start-ups such as Stripe Inc entering the fray.
And then there’s the Dorsey factor.
The IPO from six-year-old Square, founded and run by Twitter Inc. Strike three! You’re out!
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“Twitter has a lot of work ahead of them which will require a lot of Dorsey’s time”, said James Gellert, CEO of Rapid Ratings, an independent research firm. And look at it now. It’s a signal that Square will face a challenge when it finally goes public. Square seems to have concluded much the same, in that it has been expanding its offerings.
