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Square’s IPO Terms Put Valuation Below Latest Funding Round
- spdionis 11y agoCan't read the full article without registering. Any alternative source?
- vskarine 11y agotry this https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0CB4QqQIwAGoVChMIkdvF9sn8yAIVF-RjCh23Pgzh&url=http%3A%2F%2Fwww.wsj.com%2Farticles%2Fsquare-outlines-ipo-terms-1446812826&usg=AFQjCNFdXBoOiaTlPJQ8De1ADL207r4S2A&sig2=GriAtjbULuXpFlrQbwzHJQ&bvm=bv.106923889,d.cGc https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&c...
- password03 11y agoHmm, didn't work for me. Try this one: https://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web&cd=1&cad=rja&uact=8&ved=0CCMQqQIwAGoVChMI0eWtktf8yAIVhF4PCh3NzAEn&url=http%3A%2F%2Fwww.wsj.com%2Farticles%2Fsquare-outlines-ipo-terms-1446812826&usg=AFQjCNFdXBoOiaTlPJQ8De1ADL207r4S2A&sig2=dIWZTxqUMaKEE8vkVX3hlg https://www.google.co.uk/url?sa=t&rct=j&q=&esrc=s&source=web...
- myth_buster 11y agoSearch Google for the post's title.
- rory096 11y agoYou can actually now just click 'web' in the below-title links! 23 minutes ago | flag | past | web | 4 comments
- myth_buster 11y agoIs that an extension or are you on mobile? Edit: Thanks!
- ics 11y ago> [...] when you're logged in, stories on /newest and on /item pages have 'past' and 'web' links. Click on 'past' to search HN for previous stories with that title. This helps with finding duplicates. Click on 'web' go to a Google search for the story title. See https://news.ycombinator.com/item?id=10223645 https://news.ycombinator.com/item?id=10223645
- betadreamer 11y agoThat's pretty cool! Good tip. I can't reply to the comment under this but this is HN feature. It's on top of this page right under the title.
- rory096 11y agoIs this an example of the misleading late-stage valuations Sam Altman mentioned recently?[1] What were the terms of the latest raise? [1] http://blog.samaltman.com/the-tech-bust-of-2015 http://blog.samaltman.com/the-tech-bust-of-2015
- pbreit 11y agoI would say, No. Square's trajectory has definitely diminished. $300m in margin on $1b in revs should easily support a higher valuation. And most of the preferential terms apply to acquisitions, not IPOs. The "ratchet" is at the $12 midpoint so likely will not come into play. The late stage investors are not going to make money until Square goes above the $15.46 they invested at.
- pbreit 11y agoCrazy that it's around Stripe's valuation and crazier it hasn't gotten in to Stripe's business yet. Typically $300m in margin on $1b in revs would get you $6-8b but there's just too much negativity on Square right now with the part-time CEO, stream of negative media and chaotic product set.
- deleted 11y ago[deleted]
- jacquesm 11y agoYou can't 'time the market'.
- nemo44x 11y agoIt's across the board in technology mainly. Tableau was beaten down pretty badly until they recently made the case all too obvious they're ripping the cover off the ball. Other names like Hortonworks (at IPO level today) and New Relic (great quarter, improved guidance but smacked down today) have had better than expected results and are not getting much love from the public markets. If software was truly in a bubble we'd see biotech prices in the public markets where companies like Stripe would be valued at 12 billion right now. I think it's a good time to begin collecting long term positions in some of these small cap tech companies that have been offering IPO's as they may not be "cheap" but they are massive growth stories and certainly and bubbly. Some names have done well though like Tableau and Palo Alto Networks. It's a mixed bag.
- JonFish85 11y agoThe way I'd look at it is that they had the chance to scale their business through Starbucks and the massive influx of money through the system was a major dud for them. That might be terms specific to the Starbucks deal, but ultimately that level of scale didn't help. And at a numbers perspective, their revenue rose 54% last year, but so did their losses ($104m -> $154m). If their losses track their revenue growth percentage-wise, then scaling does them no good.
- myth_buster 11y agoMany highly valued companies armed with private capital have stayed away from the IPO market. I think this might become a norm in the short term * as the late stage funding rounds appear inflated, * an FED rate hike seems imminent and * arguably, public market may not have the same risk/return appetite as those investing in late stage rounds.
- akg_67 11y agoI am not surprised. Majority of tech IPOs in past year are trading below or near IPO prices. The investors in public market have learnt from the past. Most of these companies are coming to public market later when most of the upside has already been squeezed by private investors. Most IPOs come across nothing more than offloading to greater fools. Buying at IPO makes no sense. Wait till prices stabilize after the IPO at actual value (new lows) before buying.
- will_pseudonym 11y agoFacebook was a great example of this pattern. EDIT: See https://en.wikipedia.org/wiki/Initial_public_offering_of_Facebook#Subsequent_days https://en.wikipedia.org/wiki/Initial_public_offering_of_Fac.... It lost about half of its value before it started its ascension to today's valuation.
- cududa 11y agoExcept that it's almost tripled in price?
- will_pseudonym 11y agoYes, but before it tripled in price, it actually lost almost half its value. https://en.wikipedia.org/wiki/Initial_public_offering_of_Facebook#Subsequent_days https://en.wikipedia.org/wiki/Initial_public_offering_of_Fac...
- MichaelGG 11y agoSo buy at IPO with options? In FB's example that'd have performed particularly well eh?
- chollida1 11y ago>So buy at IPO with options? In FB's example that'd have performed particularly well eh? There are no Options trading on IPO's. Typically options start trading 3 months after an IPO.
- ogezi 11y agoSquare probably has solid fundamentals but a mixture of factors have caused this: bad performance of other tech IPOs so far this year and the nature of the CEOs job. I think they'll do fine but unfortunately I'm not the market.
- ogezi 11y agoSquare probably has solid fundamentals but a mixture of factors has caused this problem in which they find themselves: bad performance of other tech IPOs so far this year and the nature of its CEO's job. The performance of other tech IPOs this year has left a bad taste in the mouths of the public markets. Jack Dorsey is also the CEO of Twitter and is not fully committing to either Square or Twitter. I think they'll do fine but unfortunately I'm not the market.
- sjbase 11y agoTo me it makes sense that post-IPO market cap would be lower than private valuation. Investors in public companies are well known for having short-term interest: "we want growth in every metric, and we want it next quarter." Anyone who has worked for a public company has felt this pressure. VC, PE, etc. arguably incorporate more information about potential future (2 year, 3 year, 10 year) growth than public investors. Maybe we should stop comparing the two valuations so equally?
- URSpider94 11y agoHow could it make sense for pre-IPO investors to value a company more highly than the public markets would pay? Where, then, would those investors be hoping to earn a profit? Put another way, the public markets are an auction to the highest bidder. If there are a group of people out there (let's call them VC's) who think that Square is undervalued at the IPO price, then they should be buying up all the shares that they can get their hands on, until the price reaches their expectation of a fair valuation. I would say that an interpretation more consistent with the facts is that the expectation value of Square has dropped significantly since the last fund raising round.
- mpdehaan2 11y agoSeems to say current valuation is below previous valuation. The really bad scenario is 'current valuation is below current levels of funding' So it sounds like they are ok, they aren't just going to reap as large of rewards. Crunchbase says they have taken $590.5 million in 9 rounds, so that's still a crazy huge amount to be valued at.
- JonFish85 11y agoTo me the biggest question is what, exactly, Square does? Years ago they were the company that made it easy for people to accept credit card payments who otherwise wouldn't want to / be able to (mom & pop stores, farmers' markets, etc). But you don't build a multi-billion dollar company just there, it seems that the margins are too thin and the volume just isn't there to make up for it. Since then, they've done their Point of Sale device (not just the dongle), which I haven't heard much about. They also have their small-business-loans side--are they a bank / lending agency? They say that it's technically not a loan, but it's close enough for me. They also do (did?) payroll services for small businesses? I guess when I look at them I see them with a lot of irons in the fire, but with none of them doing particularly well. To me it seems like they've tried a bunch of things, none of them has really stuck, so they want more money to...do what? Keep trying them? Full disclosure, I worked for a company for a few years that was in a similar-ish space, so I am probably biased against them. We fought a lot of similar battles, of trying to create a margin inside of credit card margins, and I'm fairly convinced that it's not a way to scale a billion dollar business.
- x0x0 11y agoIn the bay area, a good deal of the restaurants I eat at use square. So do the farmers markets, food trucks, and my coffee shop. I probably personally spend $200 a month through square and $50 through breadcrumb, so there's room to grow.
- seekingcharlie 11y agoKey words being 'bay area', which is in no way representative of the market Square needs. Another challenge for Square is that their core merchants are mom & pop coffee shops or like you said, food trucks - not particularly lucrative segments. Square's POS can never compete with full-service POS (Aloha, Micros), and even in the quick-service market there is increasing competition (Clover POS, Revel etc). That's why they've moved into payroll, HR, time-tracking, albeit the $5 per employee is ridiculously expensive for SMB's.
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- trjordan 11y agoIf you think there's a tech bubble on because the latest private round came in higher than the IPO, consider what the explanation would be if the IPO valuation was 3x the VC round.
- nilkn 11y agoThis could be evidence of the beginning of a balloon deflation rather than a bubble bursting.
- drcode 11y agoTechnically, given that the last funding round had a stipulation saying "We'll give you more stock if the valuation falls short" I think it's arguable whether the public figures for the last round really represent a true valuation number. I think a better headline would be "Journalists who reported the last valuation didn't dig enough to see that the contract actually stipulated a lower valuation."
- reviseddamage 11y agoimo Square should have stuck to POS only and dominated that field completely. They should worked that field till saturation. Once they were near to complete, use the line item records from individual customers at POS and convert to rewards. Once that is saturated, then move to e-commerce for P2P.
- jgalt212 11y agoExpanding losses, part-time CEO, what's not to love?
- yc1010 11y agoIMHO Square has more of a real business than Facebooks and Twitters of this world do and actually have solved real world problems.