Square IPO Priced at $9 Per Share, Well Below Previous Plans

Investors are paying close attention to the flotation of more than 120 startup companies, with a valuation of more than $1 billion, otherwise known as “startup unicorns”.

The digital-payments company set the price for its initial public offering on Wednesday at $9 per share, below the $11 to $13 range it had initially proposed.

Square was co-founded by Jack Dorsey, who is now the newly reinstated CEO of social media company Twitter. Before paying its investment bankers and other fees, Square raised $231 million in the IPO, instead of the $282 million to $346 million that the San Francisco company had been seeking.

While the stock popped at the opening, the IPO price of US$9 per share was well below the expected range of US$11-$13. With shrinking growth rates and concerns over how much it costs for Square to pick up new customers, the company will have to move quickly to stand up to the investor scrutiny that accompanies a public debut.

Square is also coming into the public markets at a time when tech IPOs have been generally underwhelming. But on Thursday morning, Wilson came out swinging in defense of Square’s IPO price cut, saying: “Jack Dorsey did the right thing at Square”.

It’s another sign of a troubled IPO market – another company whose shares are set to begin trading publicly today, Match Group, also set its price at the low end of its range.

That’s because Wall Street tends to be more short-term focused and less forgiving of a company’s shortcomings than VCs who can afford to take a longer-term view.

Square which was started in 2009 generates transaction revenue as a percentage of transaction volumes through the merchants.

What’s more, Square’s CEO is splitting his time as chief executive since taking on the top job at Twitter in October. First is through hardware sales of its next-generation credit card reader, which accepts both the new EMV credit cards and contactless payments such as Apple Pay and Samsung Pay.

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 shares traded as high as $14.78 earlier in the day.

At this price, the company is now valued about $3.2bn compared to an earlier estimated valuation of $6bn after previous round of financing.