SAN FRANCISCO: 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.
Square will offer 27 million shares priced at US$9 when it begins trading as a public company, a banking source told AFP.
The offering values San Francisco-based Square at less than half the US$6 billion valuation it got in its latest round of private funding.
Sales of the shares will raise US$243 million.
Square, founded by Twitter’s Jack Dorsey - who is chief executive of both firms - said in a regulatory filing early this month that it expected to price shares between US$11 and US$13.
That price range for the initial public offering (IPO) suggested a market value of just over US$4 billion.
Some analysts have warned of a tech bubble in the private markets, with dozens of firms getting a value of over US$1 billion - “unicorns” in Silicon Valley parlance - without enough scrutiny over their financial prospects.
Square, which started in 2009 by providing financial transactions software for smartphones or tablets along with free “dongles” that plug into devices for reading magnetic strips on payment cards, is among prominent unicorns in startup rich Silicon Valley.
Square “has been a highly anticipated tech IPO,” said a note earlier this month from research firm PrivCo.
“It also comes at a time when the IPO market, especially for tech IPOs, has seen a dramatic decrease in activity due to economic uncertainty,” the note maintained.
One major question for investors is whether Dorsey, who last month retook the reins at struggling Twitter, can effectively lead both companies.
The company plans to trade on the New York Stock Exchange under the symbol “SQ.”
Regulatory filings showed a net loss in the third quarter for Square of US$53.9 million on revenues of US$332 million.
Square operates by taking a cut of 2.75% of transactions using its mobile dongle and more for purchases entered manually on its mobile app. The company faces competition from other players, notably PayPal, which was spun off this year by eBay.
In addition to the United States, Square has operations in Canada, Japan and Australia and claims to have “millions” of users around the world, ranging from independent craftsmen who use its dongle to accept credit0card payments to large chain stores.
A weak showing on Wall Street by Square could chill the surge in investment in tech “unicorns,” making private investors wary of putting billion-dollar valuations on unprofitable startups.
A total of 23 unicorns were created in the past quarter - 17 in the United States - bringing the total to 58 so far this year. According to CB Insights, there are 143 unicorns worldwide with a combined valuation of US$508 billion.
Some startups have seen unprecedented valuations such as Uber at more than US$50 billion and Airbnb at US$25 billion.
Pricing for an IPO can be tricky, because Wall Street often likes to see a jump in the market debut. But a low price can hurt private investors who bought in at sky-high valuations. - AFP
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