The value of Dorsey’s stake in Square Inc. was up about 45 percent as the San Francisco-based mobile payments company traded at $13.07 at the close in NY.
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Square’s day-one surge underscores the challenge of pricing shares in startups that, while private, attracted lofty valuations they may not be able to sustain once they’ve gone public. We’re excited to have Cory Johnson, anchor at Bloomberg West, broadcasting live from 7 am to 11 am PST. Expect to see CEO and cofounder Jack Dorsey on the floor of the exchange Thursday morning, even though he may be needed at another company he runs, Twitter Inc. “The only thing we can control is the business”.
But Square priced its initial public offering Wednesday night at a share – well below its expected range of $11 to $13.
The IPO raised $243 million, and gave Square a market value of $3 billion – or roughly half the level from its latest private funding round.
As Square went public today, it became something of a poster child for the tech industry’s most valuable startups. Its biggest corporate partnership with Starbucks turned out to be a bust, resulting in a net loss of $28 million past year and continues to be unprofitable.
A disappointing opening in contrast would lead to questions over private-funding valuations and the state of the public market. Other listings this year, such as that of cloud computing company Box, have been priced below private valuations. The weak IPO pricing raises the pressure on Jack Dorsey, Square’s chief executive.
It has been a hard time for tech flotations globally, with French music streaming company Deezer and Caribbean telecoms firm Digicel both pulling their listing plans in the past six weeks. Even as they drive private company valuations higher and higher, these heavyweight investors are simultaneously hedging their bets, negotiating safety nets to protect themselves when a company’s public offering inevitably disappoints. “I’m not an economist”, he said, “but you should talk to Larry Summers on our board, or you should talk to David Viniar who is on our board and who was a CFO at Goldman”.
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To christen the IPO, Square-using businesses gathered on a stretch of Broad Street between Wall Street and Exchange Place, with band Junior Prom providing music. According to Square’s IPO filing, the company promised a share price at $18.55 or higher for its Series E investors. The company, which started in 2009, generates transaction revenue as a percentage of transaction volumes through the merchants.
