Shares of payment technology company First Data are slipping in morning trading after the company’s $2.56 billion initial public offering, by far the largest in the US this year, priced below expectations.
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A strong trading debut could restore a few confidence in the IPO market, which has struggled through the summer as sharp stock-market swings in August and early September trimmed investors’ appetite for risk.
Square may be working with gross margins of just 29 percent and also has a net loss, in its case, $78 million for the first half of this year.
On the heels of a modest third quarter, in which both the number of US companies going public and the amount raised were at a 3-year low, sizable offerings from First Data and Albertsons signaled a possible pickup in the last three months of the year.
According to CMBC, First Data will still have $18.8 billion in outstanding debt if their $3 billion IPO goal is reached. One of the GO-Tag’s first big customers was the video rental company Blockbuster, which said at the time that the goal was “to eliminate the need for cash in our stores”.
Albertsons, which had been expected to complete its IPO Thursday, said late Wednesday it is postponing going public indefinitely. And luxury retailer Neiman Marcus Group Inc. recently decided it needed to wait as well.
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First Data is unprofitable, in part because of the interest it’s paying on that debt. While a few IPOs have proved to be good bargains based on how their shares have traded following their listing, the bruising experiences of many companies are expected to deter more IPO hopefuls in the near future.
