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Square Prices Its IPO at $9, giving it a $2.7B valuation

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Re: Square Prices Its IPO at $9, giving it a $2.7B valuation

#51

Post by c-slice »

gatsby wrote: post #18
bpodgursky wrote: post #9

According to crunchbase, they raised money at a $3.25B valuation in 2012. If they are IPOing at $2.66B now, that means a lot of stock options granted in-between are going to be worthless, unless they were granted at some very different price...

Yes, Square's private per share prices: Series A: $0.21627 Series B: Series C: $5.79817 Series D: $11.014 Series E: $15.46345 IPO @ $9 is not great for lots of folks, but mostly late-stage employees (assuming D & E investors have a liquidation preference - though I don't know for sure).

This is for preferred stock though, not for common stock. Employee options would be priced to common stock.

Re: Square Prices Its IPO at $9, giving it a $2.7B valuation

#52

Post by danielpal »

gatsby wrote: post #2

Wow, that's priced at ~2.8x 2015 revenue. So low.

If you look at gross profit (164.4 million for the first semester 2015) it's a much more comparable metric to what SaaS revenue would be. The problem with overall revenue in this market it that it's a low margin and more that half of it goes to the credit card companies.

With ~328 profit per year, they are getting about 8X multiple - very comparable to Hubspot, Zendesk which are doing terrific in the public markets.

For anyone getting stock options, expect as much as 6X-8X multiple on revenue if your gross margin is >60% and your year-to-year growth is >70% - the 10X-14X days are gone. Else, if year to year growth is below 70%, or gross margin less that 55%, expect 2X-4X.

Re: Square Prices Its IPO at $9, giving it a $2.7B valuation

#53

Post by gohrt »

harryh wrote: post #36
001sky wrote: post #32

Earlier quoted context omitted.

what about the common? i think that was the gist of the comment...do the ESOPs pay out in preferred? edit: below comment mentions using comp rsus

Strike prices on common are almost always far far below what investors are paying for preferred shares.

I thought they were priced at the last round price (which is usually a discount if you interpolate the prce between rounds)

Re: Square Prices Its IPO at $9, giving it a $2.7B valuation

#54

Post by eiopa »

msoad wrote: post #6

With rumors about  device to device payment talks[1], Square is in tough spot. [1] http://www.wsj.com/articles/apple-in-talks-with-u-s-banks-to...

person-to-person doesn't seem like a win for SMB (yet).

I would actually love to see Apple building a compelling SMB product. Pay your check at a restaurant with your phone, without even opening an app? drools

Re: Square Prices Its IPO at $9, giving it a $2.7B valuation

#55

Post by x0x0 »

isalmon wrote: post #47
bpodgursky wrote: post #9

According to crunchbase, they raised money at a $3.25B valuation in 2012. If they are IPOing at $2.66B now, that means a lot of stock options granted in-between are going to be worthless, unless they were granted at some very different price...

The stock options priced is based on the 409a valuation, not on what investors paid in the last round, so they might not be worthless.

what is a normal ratio between the two?

Re: Square Prices Its IPO at $9, giving it a $2.7B valuation

#56

Post by SeoxyS »

x0x0 wrote: post #50
SeoxyS wrote: post #14

Earlier quoted context omitted.

That, plus they've probably been granting RSUs for a while, which do not require being exercised and which cannot be underwater,

While they cannot be underwater, they were granted with a target comp in mind and a low enough IPO can put people well below the targeted value.

Sure. I think that's fine; as long as people aren't losing money on taxes or exercise price.

Equity compensation should always be viewed with the appropriate grain of salt—it's an investment, and most likely won't pan out. When the company kills it (Facebook, Apple), it turns everyone into millionaires. Square isn't there yet, though I'm sure a lot of people will have some very nice "bonuses" out of this.

Re: Square Prices Its IPO at $9, giving it a $2.7B valuation

#57

Post by [deleted] »

danielpal wrote: post #52
gatsby wrote: post #2

Wow, that's priced at ~2.8x 2015 revenue. So low.

If you look at gross profit (164.4 million for the first semester 2015) it's a much more comparable metric to what SaaS revenue would be. The problem with overall revenue in this market it that it's a low margin and more that half of it goes to the credit card companies. With ~328 profit per year, they are getting about 8X multiple - very comparable to Hubspot, Zendesk which are doing terrific in the public markets.…

[deleted]

Re: Square Prices Its IPO at $9, giving it a $2.7B valuation

#58

Post by harryh »

gohrt wrote: post #53
harryh wrote: post #36

Earlier quoted context omitted.

Strike prices on common are almost always far far below what investors are paying for preferred shares.

I thought they were priced at the last round price (which is usually a discount if you interpolate the prce between rounds)

Nah, there's a big discount because preferred shares have downside protection (as well as a few other valuable things general) so common stock is valued lower. Generally a 70% discount or so.

Re: Square Prices Its IPO at $9, giving it a $2.7B valuation

#59

Post by exw »

x0x0 wrote: post #55
isalmon wrote: post #47

Earlier quoted context omitted.

The stock options priced is based on the 409a valuation, not on what investors paid in the last round, so they might not be worthless.

what is a normal ratio between the two?

It depends on the state of the company. In the beginning, the share price between common (employee) and preferred (investor) stock can be very significant (10x or more), but as the company gets closer to IPO, the value between common and preferred stock converges to 1. Some unicorns get around this issue by issuing RSUs that retain some value even if the share price drops.

Re: Square Prices Its IPO at $9, giving it a $2.7B valuation

#60

Post by erichurkman »

x0x0 wrote: post #55
isalmon wrote: post #47

Earlier quoted context omitted.

The stock options priced is based on the 409a valuation, not on what investors paid in the last round, so they might not be worthless.

what is a normal ratio between the two?

It can range quite a bit, but you can figure around the 25 - 35% range as a rough estimate for most venture backed companies. Companies that are near-to or are already cash flow positive can move the needle higher.
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