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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

#81

Post by throwaway2048 »

heydenberk wrote: post #69

Is anyone willing to give a contrarian take? I'll give it a shot: Square is an ambitious company with some great engineers, stellar UX and a giant total addressable market. Their business loans are interesting and could grow into something important. Square readers are a fashion accessory for hip businesses. No sooner would a coffee shop be seen without a Square reader and an Edison bulb than its yuppie hipsters patr…

Are people really going to care if their joint of choice changes payment providers?

Do people care how cool their bank and credit card company is?

Id almost certainly guess not.

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

#82

Post by therein »

chasing wrote: post #77
josephjrobison wrote: post #75

I've always wondered - why was it so easy to replicate Square's scanning device? Seems like about 6 months after they really started gaining traction, PayPal came out with their copycat triangle one, and then a cascade of copycats. It went from not being a thing to there being tons of them overnight. I would imagine there would be somewhat of a barrier to entry, but it seems it's a fairly easy device to create?

There are magnetic stripe readers everywhere -- I can't imagine they're that hard or expensive to produce.

I don't imagine they are as straightforward as buying a magnetic reader and putting it in a shell. The interface is somewhat unique after all. It connects through the audio jack. The processing on the software side need to be somewhat custom as well.

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

#83

Post by genericresponse »

american158931 wrote: post #76

Can someone help me understand... Let's say an employee was granted 10,000 stock options at $1/share. They're all vested. Does this mean that each share will be worth $9? So if exercised and cashed out, the employee would essentially earn $80,000 (before taxes)? Trying to understand how the economics of all of this works. Also, does this mean there are 300,000,000 shares? (How many shares do start-ups usually start w…

I'll answer what I can: First, you're correct on the valuation. If they are exercised and cashed out at the IPO price, the employee would earn $80k pre-tax. However, historically most IPOs are priced to get a "bounce" on opening day also there are usually restrictive covenants around the number of insider shares that can be cashed on IPO day. (This is meant to give investors warm fuzzy feelings about the stock.) In all likelihood the employee will have to wait some more time and will probably cash out closer to $10/share.

The Pricing and Valuation implies 300M shares. However there can be many classes of stock, both common and preferred that grant different rights and ownership. If they have different classes they could have a different number of shares, but the different share types are valued differently.

Shares are just objects granting different rights around the company within certain legal limits. (Ownership, Governance, Profit share, etc.) If you have agreement from the controlling body you can instantiate, remove, or restructure shares at any time. The point is that they could have decided with their bankers that 300M was a good number of shares to have at an IPO and decided to split or reverse split as part of the transaction. It has no bearing on the number of shares today or a year ago.

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

#84

Post by rco8786 »

american158931 wrote: post #76

Can someone help me understand... Let's say an employee was granted 10,000 stock options at $1/share. They're all vested. Does this mean that each share will be worth $9? So if exercised and cashed out, the employee would essentially earn $80,000 (before taxes)? Trying to understand how the economics of all of this works. Also, does this mean there are 300,000,000 shares? (How many shares do start-ups usually start w…

Effectively, yes. If an employee has 10,000 options with a $1 strike that means they can purchase 10,000 shares for $1 each. Since the shares are worth $9 the employee can then sell those shares immediately for an $8 profit, or $80,000.

As far as how many shares Square has, it's much more than 300k. That's just what they're offering to the public. That percentage is listed in their S1 filing somewhere

How many shares they started with. Who knows. Doesn't really matter.

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

#85

Post by ZanyProgrammer »

pragone wrote: post #74
chx wrote: post #73

Earlier quoted context omitted.

Erm, nope. So nope. I see how many transactions the lemonade stand on the beach right below my balcony does on Square -- it's an awful lot. Runners, bikers do not need to carry cash just a card. I went with a friend to Burnaby Mountain and between the two of us we would've had problems to buy ice cream from a truck showing up for the three of us for cash but he had Square. It's not "hipsters" it's another nail in the…

Not sure where you're living, but I lived in Rochester, NY and just outside Pittsburgh, PA the last two years. The last time I saw a square reader was when I lived in Manhattan, 3 years ago. I'm not sure if I'm just not frequenting the types of places that would use square readers, or if where they're popular is isolated geographically.

I've always used them at Rage Salon, Campbell, CA.

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

#86

Post by kloncks »

american158931 wrote: post #76

Can someone help me understand... Let's say an employee was granted 10,000 stock options at $1/share. They're all vested. Does this mean that each share will be worth $9? So if exercised and cashed out, the employee would essentially earn $80,000 (before taxes)? Trying to understand how the economics of all of this works. Also, does this mean there are 300,000,000 shares? (How many shares do start-ups usually start w…

A lot of startups start with 10m or 15m

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

#87

Post by american158931 »

rco8786 wrote: post #84
american158931 wrote: post #76

Can someone help me understand... Let's say an employee was granted 10,000 stock options at $1/share. They're all vested. Does this mean that each share will be worth $9? So if exercised and cashed out, the employee would essentially earn $80,000 (before taxes)? Trying to understand how the economics of all of this works. Also, does this mean there are 300,000,000 shares? (How many shares do start-ups usually start w…

Effectively, yes. If an employee has 10,000 options with a $1 strike that means they can purchase 10,000 shares for $1 each. Since the shares are worth $9 the employee can then sell those shares immediately for an $8 profit, or $80,000. As far as how many shares Square has, it's much more than 300k. That's just what they're offering to the public. That percentage is listed in their S1 filing somewhere How many shares…

I'm seeing reports that Khosla led a Series A round of $10 million at $0.22/share (http://www.cnbc.com/2015/11/09/square-ipo-will-net-big-win-f...). At a $40M valuation.

$40M/$0.22 = ~182 million shares at that point? So they've almost doubled the number of shares they started with if they're IPOing at 300 million shares. Does that sound like a reasonable bit of math?

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

#88

Post by kethinov »

calcsam wrote: post #79
josephjrobison wrote: post #75

I've always wondered - why was it so easy to replicate Square's scanning device? Seems like about 6 months after they really started gaining traction, PayPal came out with their copycat triangle one, and then a cascade of copycats. It went from not being a thing to there being tons of them overnight. I would imagine there would be somewhat of a barrier to entry, but it seems it's a fairly easy device to create?

"The Shakespearean model holds true today. Consider the Square card reader. Square was the first company to do mobile handset credit card processing right. It did the software piece and the hardware piece, and built a brand with the iconic white square device. Then there was a proliferation of copycat readers. PayPal launched one. They shaped it like a triangle. They basically copied the idea of a simple geometric-sh…

Intuit's actually predates both Square's and PayPal's: http://venturebeat.com/2009/05/21/intuit-gopayment-lets-you-...

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

#89

Post by throwaway2048 »

calcsam wrote: post #79
josephjrobison wrote: post #75

I've always wondered - why was it so easy to replicate Square's scanning device? Seems like about 6 months after they really started gaining traction, PayPal came out with their copycat triangle one, and then a cascade of copycats. It went from not being a thing to there being tons of them overnight. I would imagine there would be somewhat of a barrier to entry, but it seems it's a fairly easy device to create?

"The Shakespearean model holds true today. Consider the Square card reader. Square was the first company to do mobile handset credit card processing right. It did the software piece and the hardware piece, and built a brand with the iconic white square device. Then there was a proliferation of copycat readers. PayPal launched one. They shaped it like a triangle. They basically copied the idea of a simple geometric-sh…

This arguement only makes sense if Shakespeare became wealthy, especially in porportion to his fame. Seeing as we know so little about the man, its impossible to say.

Its easy to be a household name and flat broke. Ask all the washed up movie and rockstars about that. There is of course an amusing "rageingly out of control costs" paralell to startups there.

An additional irony is the claims that Shakespeare was a plagurist...

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