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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

#41

Post by _delirium »

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…

> These are different from loans because they are not secured.

I'd still call them a loan, just not a secured loan. An "unsecured business loan" is already an established category [1].

[1] http://www.sba.com/funding-a-business/unsecured-business-loa...

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

#42

Post by nemo44x »

cryptoz wrote: post #31
PublicEnemy111 wrote: post #23

Earlier quoted context omitted.

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 l…

Right. The stock flopped because it came out at a time when Facebook was still trying to transition to mobile. Their revenue from PC's was fine but they seemed to be missing the boat on mobile revenue and analysts were unconvinced they could monetize mobile.

Then they had a quarterly report that blew the lid off of mobile revenue and since then the stock has been a rocket. They executed mobile well and that's what the market was looking for.

They've only gotten stronger as Twitter has floundered after coming out strong. I do not have a position in Twitter but if they figure out how to add users (what Wall St. wants to see) they too will explode higher. They have said they do not expect any significant user growth this year and not until some time next year as new strategies get put in place.

If my wife starts using Twitter then I'll load up on the stock.

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

#43

Post by URSpider94 »

sjbase wrote: post #27

To 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…

How 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.

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

#44

Post by bduerst »

akg_67 wrote: post #16

I 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…

How have private investors "squeezed the upside" of a company before IPO? Dividends?

/Not being facetious

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

#45

Post by airza »

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 see their PoS everywhere. It works super well, too.

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

#46

Post by tomp »

jegutman wrote: post #29
tomp wrote: post #24

Earlier quoted context omitted.

Personally, I think that Mark made a great move with the IPO. It's really silly to have an IPO at price $x, when it's well-known that the price will jump to $y > $x on the first day of trading. It's basically a reward for the elite, for the investors that have enough capital to be approached by the underwriting investment banks. It's money that most companies leave on the table, but Mark played it optimally.

Huge mix of incentives here. I agree with you from a financial perspective, but it's just more complicated (for all kinds of dumb reasons). A) Publicity. Do you want good headlines or bad headlines from the IPO? B) Secondary sales: It's kind of silly, but if / when you go to sell more shares the people who have made money are more likely to buy (against all logic) because some of them think of the money they made as…

A) Facebook doesn't need publicity.

B) Sure, but you want to encourage long-term investors, not short-term traders.

C) Sure, but how does Facebook benefit from that?

D) I'm pretty sure there's enough competition in the market that a single bank rejecting the block trade won't impact the final execution price too much.

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

#47

Post by jweir »

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…

They are also in the food delivery business

https://www.trycaviar.com/about-us

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

#48

Post by nemothekid »

jweir wrote: post #47
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…

They are also in the food delivery business https://www.trycaviar.com/about-us

TIL. I had no idea Caviar was a product of Square.

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

#49

Post by itchyouch »

nemo44x wrote: post #42
cryptoz wrote: post #31

Earlier quoted context omitted.

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 l…

Right. The stock flopped because it came out at a time when Facebook was still trying to transition to mobile. Their revenue from PC's was fine but they seemed to be missing the boat on mobile revenue and analysts were unconvinced they could monetize mobile. Then they had a quarterly report that blew the lid off of mobile revenue and since then the stock has been a rocket. They executed mobile well and that's what th…

The glitch was also an anomoly to the nasdaq system as the typical ipo behavior was usually to buy up shares.

Rather in FB's case, there was a flood of order cancellations (in response to the news) entering the system that would reset the ipo book, preventing the ipo from going off.

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

#50

Post by fweespeech »

tomp wrote: post #24
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.

Personally, I think that Mark made a great move with the IPO. It's really silly to have an IPO at price $x, when it's well-known that the price will jump to $y > $x on the first day of trading. It's basically a reward for the elite, for the investors that have enough capital to be approached by the underwriting investment banks. It's money that most companies leave on the table, but Mark played it optimally.

It stills screws everyone who is dumb enough to buy at the IPO price and the general public who is dumb enough to believe its real. They paid the Aug 2013 price to get Facebook in 2012.
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