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November 19, 2015

Square cuts IPO price to $9, scales back valuation

News: Price is below estimated range of $11 to $13.

By CBR Staff Writer

Payment processing firm Square will have to reportedly pay a $93m penalty to investors after the company’s initial public offering (IPO) was priced well below the estimated range.

The company’s IPO of 27,000,000 shares is priced at $9, below the estimated range of $11 to $13.

Square is offering 25,650,000 shares, with 1,350,000 shares offered by the Start Small Foundation charitable fund, the selling stockholder.

At this price, the company is now valued about $3.2bn compared to an earlier estimated valuation of $6bn after previous round of financing.

Square CEO and founder Jack Dorsey created the Start Small Foundation charitable fund.

The company recorded revenue of approximately $560m in the first half of 2015, which is a 51% increase over the first half of 2014. However, for the same period, Square incurred losses of $77.6m.

The Wall Street Journal reported that Square’s IPO is well under the $15.46 that investors such as Rizvi Traverse and J.P. Morgan paid last fall.

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Square agreed to give the investors more shares if its IPO price did not reach a certain level. Investors asked for a 20% return on their spending, pricing the IPO at $18.56.

The company should now give 10.3 million shares to investors as it missed the price by more than half.

 

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