Square Gets Slight Pop, Opens At $11.20

It seems there is a major setback for Square, Inc. and its founder Jack Dorsey even before the shares for the company hit the trading floor.

Square will be pricing 27 million shares at $9 each, which is lower than the $11 to $13 price it said it was targeting in a filing earlier this month to the U.S. Securities and Exchange Commission.

The company planned to sell 25.7 million Class A common shares, while a charity created by Dorsey is set to sell about 1.35 million.

Why is there such a discrepancy between the prices that Silicon Valley and Wall Street are willing to pay for Square?

While other unicorns such as Hortonworks and Box have received tepid receptions from the market, Square is both larger and better known.

But Square’s lowered IPO share price is a bit of a downer for the tech sector in general.

Mobile payments startup Square will make its stock market debut on Thursday priced lower than expected in a sign that soaring values of tech startups may be coming back down.

The company’s still solidly in the red, but it narrowed its operating losses year over year, from $79.9 million in the first half of 2014 to $74.4 million in the first half of this year.

One-third of US-based tech companies that went public this year priced their shares below their private value, according to data from market intelligence company Ipreo and data provider Pitchbook.

Compounding concerns is Square CEO Jack Dorsey’s dual role running Twitter, a social media company struggling for a turnaround. Jive Software priced at $US12 in 2011 and was trading at $US4.64 on Wednesday. He added that Square can grow sales at an impressive clip by continuing to target small merchants – but this is a market that isn’t very lucrative. Twitter is in the process of restructuring, while Square is figuring out the ropes of being a publicly traded company.

But Square, a payments service once considered the darling of Silicon Valley, and Tinder, arguably the hottest dating service around, were clearly not prepared for the lackluster reaction they’d receive from investors as they tried to go public this week. The company’s two-timing chief executive, rising competition and substantial losses provided ammunition for old-school mutual fund managers demanding big discounts to lofty private valuations.

Square also competes with PayPal – whose stock has been relatively flat since it was spun off from eBay a few months ago. It bought food delivery service Caviar previous year and has started up Square Capital to lend money to a few of its small business customers.