Hip to be Square? Not for this IPO

The late stage, or Series E, investors valued Square stock at $15.50, and built in a guaranteed 20% return on those shares.

“Half the recent listings are now seeing their shares trade at a lower price than the closing price on their first day of trading”. Though Square has had a good day so far, it will be a few months before the dust settles and we can accurately determine whether much has changed for tech companies going IPO. Square – valued in a private financing past year at $6 billion – priced its initial public offering at a level that gave the payments company a valuation of $2.9 billion. 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. Even Twitter Inc (NYSE:TWTR) traded below the IPO price while GoPro Inc (NASDAQ:GPRO) shares also slipped below the IPO price.

Mac Riley, center, son of Square CFO Sarah Friar, rings a ceremonial bell as the Square IPO begins trading on the floor of the NY Stock Exchange, Thursday, November 19, 2015. Shares of Square jumped $4.07 to $13.07 – taking Dorsey’s stake in the company to $910 million. The surge helped ease the pain of a mortifying markdown in Square’s IPO price. Fund manager Fidelity Investments recently even slashed its holdings in popular private companies including app Snapchat.

Square, which allows retailers to easily accept credit and debit cards, was founded by Mr Dorsey in 2009 after he was sacked from Twitter, the social network he started.

“Two years ago, when the IPO market was hot, they might have been able to coast on their buzz and “cool” factor alone, but the environment is different right now”, Brian Hamilton, chairman of data firm Sageworks, said earlier this week.

During the first nine months of this year, square recorded a loss of $131.5 million, and a 49% increase in revenue to $892.8 million. The company raised $243 million from its debut, and plans to use the proceeds for general corporate purposes.

On Wednesday, the San Francisco-based electronic payments company made the announcement, via blog post, that it has filed the necessary public documents with the U.S. Securities and Exchange Commission, though the number of shares it will offer and the price range for the offering have not yet been determined.