But that percentage gain looks less impressive when you consider the actual dollars the company took in. Square’s point of sale service offers tools for all part of company operation, from accepting credit cards and tracking inventory, to real time analysis and invoice.
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The midpoint of the price talk for Square was $12.
One person familiar with the matter told us that the pricing of the IPO at $9, below the $11-13 range, had nothing to do with the dual role of Square CEO Jack Dorsey. Companies took private money, built a business, and rushed to the public markets, with their shares often surging to irrational values as soon as they hit the exchanges, meaning big paydays for early funders.
The discrepancy suggested a growing divide between public and private valuation models, particularly for so-called “unicorn” companies, private companies with a valuation of more than $1 billion. It won’t be with colossal losses on the public markets, with mom-and-pop investors losing their shirts like they did back in the 1990s.
With shares climbing to such heights, the company’s value recovered to north of $4.7bn. Now worth $2.9 billion, the company is worth significantly less than the massive $6 billion valuation it held past year after a private funding round. With aggressive companies like Apple (AAPL), ahem, getting into this space, how will SQ be able to compete against them in coming years? “Institutional investors are more conservative; they want to see stronger fundamentals”.
“Square priced the IPO to incentivize and leave a good taste in investors’ mouths”, said Josef Schuster, founder of IPO research and investment house IPOX Schuster. There just haven’t been enough IPOs to make that a reality, and numerous IPOs we’ve seen have garnered lackluster enthusiasm from the public, leading to unimpressive longer-term results (see: Lending Club, Etsy, Alibaba, and Twitter). It has evolved into a suite of small-business services, relying on partnerships with companies such as Apple and Visa. He returned as Twitter’s chief executive last month, but remains in charge of Square despite questions over whether he can dedicate time to both companies.
Square’s revenue grew 51% year-over-year (YoY) to $560 million in the first half of 2015, with Gross Payment Volume (GPV) arriving near 16 million, up 53% YoY.
Square was planning to price somewhere between $11 and $13 a share, which, analysts say, is already pretty cheap. But the company’s operating losses jumped to $150.5 million from $85.4 million in the same period.
Ken Polcari, director of the NYSE floor division at O’Neil Securities, said he thought the low price of the offering, which cleared the way for the first-day pop, was a smart move in the current market environment. But its robust performance on its first day of trading has renewed hopes for other startups that have yet to schedule a Wall Street opening. You may be one of the many millions of people on the planet who have never heard of Square – and nor should you have. “The underwriters misestimated what the market was willing to pay”. “The fact that Square cut the price and then saw extra demand shows there’s more interest in the company from non-traditional IPO investors”. ENERGY: Benchmark US crude fell 21 cents to $40.54 a barrel on the NY Mercantile Exchange.
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However, Square still stands on shaky ground.
