Square IPO price falls short of expected range
SAN FRANCISCO — Pricing of Square's highly anticipated initial public offering landed with a thud late Wednesday.
The mobile payments-processing company said it had priced 27 million shares at $9 per share, shy of the $11 to $13 it had previously indicated in a regulatory filing. Square said it granted the underwriters the option to purchase up to an additional 4 million shares.
With 323 million shares to be outstanding after the IPO, the offering values the San Francisco-based company at $2.9 billion — half the most recent valuation of $6 billion by private investors.
Square will start trading Thursday on the New York Stock Exchange under the ticker symbol "SQ."
The IPO is being keenly watched as a harbinger for the fate of unicorns, start-ups valued at more than $1 billion. The disappointing pricing illustrates a tough market for the debut of tech companies, underscoring the chasm between the optimism of private company valuations and a skeptical public market.
A scant 14% of IPOs this year have been tech, the industry's lowest representation in seven years, says Dealogic.
Square's IPO valuation reflects tougher market for tech debuts
The scrutinized IPO has been colored in part by concerns over Square's revenue growth and Dorsey's dual role as CEO of both Square and Twitter, which he co-founded. (Twitter set its IPO price in November 2013, with a $14.2 billion valuation.)
"Unfortunately, the (IPO) timing is not perfect, given the (recent) sell-off of tech stocks and concern over an IPO bubble," says Andrew Chanin, CEO of Purefunds, a mobile-payment exchanged-traded fund.
Square's debut on the public market isn't likely to assuage jittery tech investors, smarting over the wobbly performance of cloud storage company Box. It opened in January at $20.20 after an IPO price of $14, but is currently trading in the $12 to $13 range.
Meanwhile, Square faces a spectrum of competitors large (PayPal, First Data) and small (Poynt, Vantive). Square Register, its point-of-sale app and hardware stand, outpaces its primary rival PayPal with daily active Android users in the U.S., but it is dwarfed by PayPal's installed base of 8.3 million in the U.S., compared to 450,000, according to WeFi, a mobile app data analytics company.
Square begins bumpy road to IPO with roadshow
More than 2 million merchants used Square over the last year to process $32.4 billion in total payments volume, the company says. Square has delved into a cash advance program and other areas servicing small businesses.
Follow USA TODAY San Francisco Bureau Chief Jon Swartz @jswartz.