Square sets stock price at $9, well below its price range

Shares in global payment company Square jumped 46% in the open hours of its first day of trading.

IPO investors were concerned that Square’s primary business, processing credit-card transactions for millions of small- and medium-sized businesses, might not be appealing in the long term.

Turn now to Twitter, without tacitly picking on Dorsey (the companies’ common chief executive), which tells another story of the mainstream equity market placing more scrutiny on prices compared to Silicon Valley investors. The simple card reader attracted millions of small merchants, like coffee shops and food trucks, that previously couldn’t accept credit cards. However, the company’s consumer-facing services don’t seem to have taken off, and it’s facing increasing competition from other point-of-sale services.

“It wasn’t about the conditions, it was more about our readiness”, he said.

The float is being viewed by many as a bellweather for tech stocks and the durability of so-called unicorns – highly valued venture capital-backed startups, raising fears that there is a tech bubble.

“You hear Twitter and you hear Square and you assume a distance – there’s an assumption that I had to travel a few extreme path and there’s no way that I could be at both companies every day”. While IPO “downrounds” have not been uncommon for recent biotechs, Square’s decision to discount is certainly notable for its size (42% below 2014 Series E) and initial success.

Square’s stock rocketed above its initial public offering price by as much as 64 percent on Thursday, before fading in late session trading to a gain of more than 40 percent, in one of the most closely watched debuts of a tech stock this year.

It was unclear whether the donated shares were subtracted from the stake disclosed to the SEC.

The weaker price puts Square’s market capitalization at $2.9 billion, a far cry from the $6 billion valuation it had earned from private investors.

According to Dow Jones VentureSource, Square is one of more than 120 private technology startups estimating valuations above $1 billion, and also one of the most valuable ones focused on financial technology services. Also, enterprise storage company, Pure Storage, which launched its IPO earlier this year, was not well received by investors.

Even at a $2.9 billion valuation, Square would be trading at nearly 7 times Luria’s sales forecasts. Dorsey is also the CEO of Twitter. That’s the rational and right thing to do.

In its first couple of years, Square got people to use iPhones and little white dongles to pay with plastic – at farmers markets, art fairs and coffee shops.

With shares climbing to such heights, the company’s value recovered to north of $4.7bn.