Square is a mobile payments company founded by Twitter CEO Jack Dorsey six years ago. The San Francisco company is known for its recognisable small white card readers that plug into smartphones and tablets, allowing small traders to take payments by card.
In a closely watched IPO last Wednesday, Square debuted on the public markets at what was seen as a very disappointing 9$ per share. The sale put a value of less than $3 billion (€2.8 billion) on the company, compared to the $6 billion (€5.6 billion) price tag attached to the business when it last tapped venture capitalists for funding. The public offering raised $243 million (€227 million) for the firm.
The listing on Wall Street has been seen before as a litmus test for other high-priced ‘unicorns’ – privately held startups with valuations of more than $1 billion – after the staggering sums pumped into so-far unprofitable companies like Uber and Airbnb in recent years. The underwhelming sale price was a strong indicator that many investors did not buy into the promises of exponential growth and future profits from the highly touted new company. This compounded with the fact that a number of tech IPOs have performed poorly over the past year, and prominent mutual fund investors including Fidelity Investments had been marking down the value of their private tech holdings.
However, on Thursday, in a turbulent first day of trading, the price jumped to more than $14 before settling at just below $13, a gain of roughly 45%. The bump has helped sooth anxiety over the future of tech investments, and Square’s strong start was followed by a positive debut by online dating empire Match Group, whose shares finished the day up nearly 23%. Tom Donino, co-head of trading at FNY Capital Management, said ““The fact the stock is now this strong will probably quash [the bearish sentiment around private-company valuations]”.
Following this, Dorsey and co will be feeling confident in their competition with Visa and other credit card companies, as well as Apple, all of which are increasingly looking to dominate the expanding mobile payments business. Many will be familiar with Visa Contactless and Apple Pay, but don’t be surprised if you start seeing little white boxes in the hands of your local small traders.
By Jack O’Sullivan