Square trading above IPO issue price in market debut

But, more generally, the issue price coming in below Square’s private market valuation could put a chill on high private valuations that do have effects when a company goes public.

When Square prices its initial public offering on Wednesday night, it could set a precedent for scores of other tech startups like it.

A number of tech IPOs have performed poorly over the past year, and mutual fund investors including Fidelity Investments have been marking down the value of their private tech holdings.

The company’s cut from the payment processing fees generated revenue of $893 million during the first nine months of this year, a 49 percent increase from the previous year. “What they don’t want to do is damage themselves by trying to be so super-aggressive”.

While seemingly every week there are billion-dollar buyouts and valuations of companies that have yet to make a single dime in profit, the truth is that those valuations happen within the Silicon Valley bubble itself.

Square, which is set to begin trading on the NY Stock Exchange Thursday under the symbol ‘SQ, ‘ had already disappointed investors when it set its valuation at $4 billion, 30 percent less than the $6 billion it’d been valued at during its final round of private funding a year ago. “So we are going to grow but we are going to do it in a disciplined way”.

Friar pointed to the consumer trend of shopping less with cash.

“Square’s financials leave much to be desired. But there’s still a lot to like here”.

Wall Street so far seems to have little confidence in Square CEO Jack Dorsey, who has emerged as one of Silicon Valley’s best-known entrepreneurs since he co-founded Twitter in 2006. Meanwhile big banks and card processors continue to dominate the payment business, and Square has to pay out most of its gross revenues to banks and credit card networks. During that round, Square raised $150 million at $15.50 per share.

Twitter has been struggling with flat user growth and tumbling shares, and when Dorsey took the helm in October he promptly announced job cuts in an effort to return the social network to growth. Start Small Foundation, a charitable fund created by Dorsey, sold about 1.35 million shares.

The low price had caused a few investors to speculate about the long term financial health of the company.

The valuation discount for Square is among the steepest since the start of 2014, although it is below discounts of 40 percent for big-data company Hortonworks and 32 percent for storage company Box.