Square’s roller-coaster IPO points to rising competition

The discrepancy suggested a growing divide between public and private valuation models, particularly for so-called “unicorn” companies, private companies with a valuation of more than $1 billion. As of the end of this September, Square’s revenue is around $893 million, but they’ve had a net loss of $132 million. We’re excited to have Cory Johnson, anchor at Bloomberg West, broadcasting live from 7 am to 11 am PST.

Square was founded in 2009 after co-founder Jim McKelvey, an artist, realized how hard it was for small businesses to accept card payments when he could not do so at an art show. He returned as Twitter’s chief executive last month, but remains in charge of Square despite questions over whether he can dedicate time to both companies.

The surge in Square’s stock price highlights the challenges of pricing shares in startups that tend to attract high valuations, but may not be able to sustain these valuations once they become public.

The research firm PrivCo said Square’s debut “will set a precedent with regard to how investors react to unicorns in the public market”.

The company – owner of dating websites Match, OkCupid and Tinder – saw its share price rise as high as 17% from its original $12 price tag.

The payment processor’s IPO raised US$243 million after the company’s shares were priced at US$9 each. That price would put the companys valuation, minus stock option grants for employees, at slightly less than $3 billion, approximately half of the vaunted $6 billion valuation from its last private funding round, which included in investment from the government of Singapore. Google Inc. said during its 2004 first-time share sale the USA securities regulator was investigating whether it violated rules on information disclosure, after founders Sergey Brin and Larry Page granted an interview to Playboy magazine.

Square Inc. is having a bit of a struggle with its shares, now at $9, which is 25% less than was initially expected.

Perhaps as a nod to the unease about its IPO, Square said Wednesday that it would price its offering at $9 per share, significantly below its expected range of $11-$13 (roughly Rs. 727 – Rs. 860). That leaves a company that’s doing $1 billion per year in transaction fees and has yet to turn a net profit.

But Friar notes that all of Square’s products go hand-in-hand and the company’s payments data gives it an edge over its competitors.

“There’s going to be a bunch of noise – what it means for Jack, what it means for Square, what it means for the stock market – and we can’t control any of that”, Dorsey said. For the first six months of this year, the company had a loss of $77.6 million on revenue of $560.6 million.