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Square’s IPO Terms Put Valuation Below Latest Funding Round

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Re: Square’s IPO Terms Put Valuation Below Latest Funding Round

#31

Post by cryptoz »

PublicEnemy111 wrote: post #23
will_pseudonym wrote: post #17

Earlier quoted context omitted.

Facebook was a great example of this pattern. EDIT: See 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.

Facebook's IPO flopped because of a glitch in the nasdaq where orders weren't being filled for hours and then multiple orders were being filled. It was not because investors didn't like the stock

I don't think the NASDAQ glitch had anything to do with it. FB flopped for many months after the IPO, not just on the first day. A much more likely reason for the decline that lasted months and brought the price down to $18/share is that investors didn't like the stock.

NASDAQ glitches don't curse a stock for months at a time.

Edit: https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&...

Edit 2: Actually it looks like it took well over a year before the stock rebounded above IPO price.

Re: Square’s IPO Terms Put Valuation Below Latest Funding Round

#32

Post by mpdehaan2 »

Seems 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.

Re: Square’s IPO Terms Put Valuation Below Latest Funding Round

#33

Post by chollida1 »

MichaelGG wrote: post #25
will_pseudonym wrote: post #22

Earlier quoted context omitted.

Yes, but before it tripled in price, it actually lost almost half its value. https://en.wikipedia.org/wiki/Initial_public_offering_of_Fac...

So buy at IPO with options? In FB's example that'd have performed particularly well eh?

>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.

Re: Square’s IPO Terms Put Valuation Below Latest Funding Round

#34

Post by JonFish85 »

To 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.

Re: Square’s IPO Terms Put Valuation Below Latest Funding Round

#35

Post by antiffan »

JonFish85 wrote: post #34

To 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…

I'd like to see them get into the enterprise space and build a subscription management platform in the same space as Zuora. They certainly have the domain expertise, design, and engineering talent to do this.

Re: Square’s IPO Terms Put Valuation Below Latest Funding Round

#36

Post by numlocked »

JonFish85 wrote: post #34

To 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…

Re: their small business 'loans' -- with the caveat that I am not an expert:

The "loan" distinction is important not for semantic reasons but practical one -- they are offering small businesses cash advances. These are different from loans because they are not secured. There are no assets put up as collateral. However Square believes they can do this better than other services because they can effectively secure the advance by taking a piece of each card swipe at the merchant's point of sale system. But if the business goes under, Square has no claim on any assets.

I don't totally understand why/when merchant cash advances work, but I believe that adequately captures the 'how'.

Re: Square’s IPO Terms Put Valuation Below Latest Funding Round

#37

Post by MichaelGG »

chollida1 wrote: post #33
MichaelGG wrote: post #25

Earlier quoted context omitted.

So buy at IPO with options? In FB's example that'd have performed particularly well eh?

>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.

Oh, interesting. I looked up recent IPOs on Nasdaq and ones from last month have options now. First Data (FDC) has been trading only 3 weeks and has options. But really low volume and ridiculous spreads. RACE has been trading only 3 weeks for less time and has more options. Perhaps they are exceptional due to their size?

Not that this would help with FB a whole lot since it'd have dropped a fair amount by the time you could buy options.

Re: Square’s IPO Terms Put Valuation Below Latest Funding Round

#38

Post by x0x0 »

JonFish85 wrote: post #34

To 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…

In 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.

Re: Square’s IPO Terms Put Valuation Below Latest Funding Round

#39

Post by x0x0 »

numlocked wrote: post #36
JonFish85 wrote: post #34

To 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…

Re: their small business 'loans' -- with the caveat that I am not an expert: The "loan" distinction is important not for semantic reasons but practical one -- they are offering small businesses cash advances . These are different from loans because they are not secured . There are no assets put up as collateral. However Square believes they can do this better than other services because they can effectively secure th…

Seeing a business' cash flow should give you great insight into their ability to repay. Just a few of the things you can calculate that a bank can't: microtrends in income, repeat customers (and trends thereof), changes in transaction size as well as volume, etc. Plus it's easier to collect on that loan.

Re: Square’s IPO Terms Put Valuation Below Latest Funding Round

#40

Post by damoncali »

numlocked wrote: post #36
JonFish85 wrote: post #34

To 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…

Re: their small business 'loans' -- with the caveat that I am not an expert: The "loan" distinction is important not for semantic reasons but practical one -- they are offering small businesses cash advances . These are different from loans because they are not secured . There are no assets put up as collateral. However Square believes they can do this better than other services because they can effectively secure th…

Square only offers an advance based upon your cash flow history. There is still risk, but they recoup their loan at a pretty good pace which makes the implied interest rate very high. But- it can be a good deal for the vendor anyhow because it is unsecured, and there is guaranteed cash flow with which to repay it. If you don't make any money, you don't pay anything.

But square appears smart enough only to give the money to people who are fairly certain to have stable enough cash flow to make it work.

On the one actual square example I've seen it looks like the repayment is on the order of 6 months, and is a total of roughly half a month's cash flow.

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