Kathleen Smith, principal at Renaissance Capital, a manager of IPO-focused exchange traded funds, said the significant discount in Square’s IPO price suggests that “it can not be assumed that Atlassian will go public above its last valuation round”. The IPO had an indicated range of $11 to $13 per share.
Advertisement
A 45 percent spike caught nearly everyone off guard after the company priced its stock at $9, well below what had been expected late Wednesday.
Mobile payments processor Square had to sell its stock at a deep discount to complete its initial public offering, a concession signaling that investors are becoming wary of once-hot startups that haven’t proven they can make money.
Despite the companies’ problems, they have made Dorsey a rich man. His stake in Twitter is worth $560 million and his stake in Square is now worth $640 million.
Square is the second unicorn to go public in recent months.
With more than 140 private companies valued at $1 billion or more – also known as unicorns – investors in the startup world have grown increasingly edgy.
“Now is the time, because you have a big platform shift in payments happening in the United States and we wanted to get that message out”, Square Chief Financial Officer Sarah Friar said in an interview with this newspaper.
A $9 share price values the San Francisco mobile payments company at $2.9 billion. As just one example, the Starbucks deal cost Square $118.5 million in the nine months ended September 2015, while only bringing in $95.2 million in transaction revenue.
And the company’s market of payment processing entails a number of unknowns.
“We are offering an end-to-end technology platform”.
Compounding concerns is Square CEO Jack Dorsey’s dual role running Twitter Inc, a social media company struggling for a turnaround.
The company is going public on the same day that another well-known tech firm, dating portfolio Match, is set to start trading.
The project management software and chat tool maker, founded by University of New South Wales computer programmers Mike Cannon-Brookes and Scott Farquhar in 2002, was valued by private investors at $US3.3 billion in April 2014. It bought food delivery service Caviar previous year and has started up Square Capital to lend money to a few of its small business customers.
Advertisement
Early stage investors like Maarten Hooft of Quest Venture Partners say that cost management is important at every stage of the startup game, particularly early on, and that it will likely become moreso.
