Square IPO price falls short of expected range

Square’s shares are scheduled to begin trading Thursday on the NY Stock Exchange under the ticker symbol “SQ”.

Square will IPO Thursday morning, launching with a $9 a share price.

In a litmus test for the cooling tech IPO market, mobile payments service Square slashed its IPO price to $US9 a share on Wednesday night, giving it a valuation of about $US2.9 billion.

Private investors were expected to closely scrutinize Square’s first day of trading because they may be seeking signals about the viability of financing tech startups.

CNBC reported that Square is one of the most prominent companies valued over $1bn to plan a public offer this year.

“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. That’s below the company’s projected range of $11 to $13 a share.

The IPO priced at $9 per share, 42 percent less than the value of its shares in its most recent private fundraising round. “It’s just not clear that their payments processing business is going to be the core business over the long-haul just because the economics of that business are challenging”.

“We are offering an end-to-end technology platform”.

On the eve of its initial public offering, we now know that Square – co-founded by Twitter CEO Jack Dorsey – has lost a few of its value, and along with it, a few of its luster. According to Smith, companies that have gone public in the fourth quarter have traded at an average of 25 percent below the midpoint of their price range.

It could also serve as a bellwether for other tech companies planning to go public soon.

For the nine months ending September 20, Square made $892.8 million in revenue, a 49 percent increase from the same period in 2014, but slower revenue growth compared with prior years. The company earned revenue of $751 million on $23.78 billion in transaction volume past year. “These are companies that are spending a lot to grow their top line but still have a tough path to profitability”.

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.

Square, which started off as a simple card reader that plugged into a speaker adaptor, spent years trying to differentiate itself as a hip consumer brand as much as it was a point of sales service for small- to medium-sized businesses.