Mobile payments company Square plans IPO

Besides leading Square, Dorsey two weeks ago also became the official chief executive of Twitter, a company he also helped co-found.

Square filed regulatory papers on Tuesday for an initial public stock offering valued at up to $275 million, although that figure could change. So while the payments provider is popular with self-employed dog walkers and babysitters, who use it to accept debit and credit cards instead of cash, that doesn’t scale well.

First, the high level: Square recorded revenue of about $560 million in the first half of the year, a 51 percent increase over the first half of 2014. It reported a net loss of $77.6 million, vs. a net loss of $79.3 million. The company intends to trade on the New York Stock Exchange under the ticker “SQ”.

Goldman Sachs & Co, Morgan Stanley, Barclays and Jefferies are among the underwriters for the offering, Square said in the filing on Wednesday. Over the summer, it submitted a confidential filing under the JOBS Act, a statute that allows undisclosed filings from companies with less than $1 billion in annual revenue.

Dorsey owns 24.4 per cent of Square, according to the filing.

Merchants that handle more than $5 million in payments annually are more likely to get customized software solutions from larger technology companies, putting them beyond Square’s reach, said Brendan Miller, an analyst at Forrester Research Inc.

Dorsey last month announced plans to open a Square office in the Cortex district of the Central West End.

In 2014 alone, Starbucks transaction revenues with Square were $123 million – but that revenue incurred nearly $151 million in transaction costs. Many speculated this meant the deal was financially disadvantageous to Square.

The recent spinout of PayPal Holdings Inc. from its former parent eBay Inc. could set a bar for investors trying to assign a public-market value for Square. “I don’t think IPO investors will find their financials really appealing”, said PrivCo founder and CEO Sam Hamadeh. Square’s innovation was a small, square card scanner that plugs into an iPhone’s audio port. It connects to a payments app, and a suite of other financial and market services that Square hopes to upsell to businesses.

Twitter Chairman and Square CEO Jack Dorsey moderates a panel discussion with Detroit entrepreneurs at Techonomy Detroit at Wayne State University September 17, 2013 in Detroit, Michigan.