As Queenie Wong wrote, the money-losing San Francisco company’s lower IPO price triggered a ratchet, which means the company will have to cough up more shares to a few investors who were guaranteed a 20 percent investment. It rose as much as 64% in early trading after selling shares at $9 apiece, below the planned range of $11 to $13. Even with Thursday’s rally, Square’s stock remains below the $15.46-per-share price that the company fetched a year ago when it raised $180 million as a privately held startup.
Advertisement
The less-than-stellar launch comes as public investors have grown skeptical of the sticker price on Silicon Valley’s 140-plus unicorns, or private companies valued at over $1 billion, even as private investors continue pouring millions of dollars into promising tech ventures. He is the chief executive officer of both Square and Twitter Inc (NYSE:TWTR) at the same time.
Square CEO Jack Dorsey gets a birthday kiss from his mother, Marcia Dorsey, before his company’s IPO at the NY Stock Exchange on Thursday.
The company’s IPO of 27,000,000 shares is priced at $9, below the estimated range of $11 to $13.
Square, which allows retailers to easily accept credit and debit cards, was founded by Mr Dorsey in 2009 after he was sacked from Twitter, the social network he started.
Closer inspection of Square ” s funding does in itself highlight the problems valuing early stage tech companies.
That’s important because IPO activity has dropped off sharply this year. Square is not the first IPO of the so-called unicorns – private companies valued at $1 billion or more – to go public below its latest private valuation.
The market has effectively become more conservative in their outlook for companies going public. The firm reported top line revenue growth of just above 50% for 2014 compared to 2013, with H1 2015 results also showing an increase of 50% in revenues compared to the same period previous year.
Advertisement
The company said in the filing to the SEC that Starbucks has announced that it will transition to another payment processor and will cease using Square’s payment processing services altogether before the scheduled expiration of the agreement in the third quarter of 2016. Match Group, which owns Tinder and other online dating services, also went public yesterday and was priced on the low end of the range, but saw a 22% jump in its market debut.
