This thread is awesome. For someone sitting afar and looking to invest in Square, the information on this thread is sufficient enough for me to dig deeper on specific points. I wish Wall St analysts did something open like this, rather than just publish some 'post facto' report.
Square Prices Its IPO at $9, giving it a $2.7B valuation
141–150 of 185 posts
Re: Square Prices Its IPO at $9, giving it a $2.7B valuation
#142Is 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…
Coffee shops like Square because it offers one of the lowest rates for tiny under $10 purchases, not because it's "hip". It's a flat 2.75% without any additional $0.10-0.30 fee like some other processors. So a $4 coffee costs the merchant just 11 cents to charge. Unfortunately this is because Square actually loses money on these sales, which you can confirm by looking at the public available interchange rates for Vis…
Square does high enough volume to negotiate better rates than you'd expect.
Re: Square Prices Its IPO at $9, giving it a $2.7B valuation
#143Earlier quoted context omitted.
No sooner would a coffee shop be seen without a Square reader and an Edison bulb I'm not so sure about that. I'd agree that they all have "fancy" (for want of a better word) payment systems, but I don't think there's a reason they have to be the fancy ones made by Square. But more importantly: the US is (finally) moving to chipped and tap-to-pay transactions. That means that pretty much all merchant hardware is going…
I have a quick question about this - there is exactly one business in my area that has actually switched over to chipped cards, and that's Home Depot. Everyone else goes "lol we don't do that, use the magnetic swipe like a normal person" when I try it. I thought that the adoption date was in October, and seeing as how everyone has the machines already... what the hell is going on?
Liability was to switchover from the issuer to the merchants' processors (banks) in October, so that was the big push, to off-set liabilities. My experience is about 25% require Chip and PIN.
Some consumers are registering complaints about slow lines due to C&P[1] most of it due to longer C&P processing time.
[1]http://security.itbusinessnet.com/article/One-in-Five-Consum...
Re: Square Prices Its IPO at $9, giving it a $2.7B valuation
#144Earlier quoted context omitted.
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.
Hmmm interesting.... I have had in depth conversations about this, and I strongly feel that you are missing something. Sure, in certain areas having a ipad/square reader combo is not necessary. It may actually be detrimental I would imagine. I am not talking about some random small town in Missouri, I am talking about less trendy districts of a city or a coffee shop with a more old school vibe. BUT in large cities an…
in San Francisco, I'm starting to see post-Square registers crop up. For example, Revel ( https://revelsystems.com/ ) is also iPad-based.
Re: Square Prices Its IPO at $9, giving it a $2.7B valuation
#145Earlier quoted context omitted.
Coffee shops like Square because it offers one of the lowest rates for tiny under $10 purchases, not because it's "hip". It's a flat 2.75% without any additional $0.10-0.30 fee like some other processors. So a $4 coffee costs the merchant just 11 cents to charge. Unfortunately this is because Square actually loses money on these sales, which you can confirm by looking at the public available interchange rates for Vis…
Square does high enough volume to negotiate better rates than you'd expect.
Maybe on credit cards. Probably not on low value debit card transactions, specifically the fixed fee.
Re: Square Prices Its IPO at $9, giving it a $2.7B valuation
#146Is 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…
Square has a habit of wasting a bunch of energy on bad ideas: half the company worked on Square Wallet, which was a dead-end. Half the company worked on the Starbucks integration, which is now known to be a money pit.
I sort of think this means that they're undervalued. All they have to do is stop throwing time and money away and they'll be a lot more productive and profitable.
Re: Square Prices Its IPO at $9, giving it a $2.7B valuation
#147I'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 first generation Square readers were basically the read head from a tape recorder soldered to an audio plug. All of the signal processing was done in software, and even that was pretty simple - magstripes are low bit-density binary, after all. The readers were simple enough that they made the first few hundred by hand, in San Francisco. Once they started mass producing them they were dirt cheap.
Gradually that's changed, though. Pressure from the credit card industry and other payment processors forced Square to start encrypting the magstripe data so that malware on smartphones wouldn't have access to the card numbers (I don't know whether this is a legitimate concern, but the pressure was strong). So Square started putting integrated circuits (and batteries!) into the readers.
Now, with the chip readers coming out, they're starting to be seriously complicated hardware.
Re: Square Prices Its IPO at $9, giving it a $2.7B valuation
#148Earlier quoted context omitted.
Coffee shops like Square because it offers one of the lowest rates for tiny under $10 purchases, not because it's "hip". It's a flat 2.75% without any additional $0.10-0.30 fee like some other processors. So a $4 coffee costs the merchant just 11 cents to charge. Unfortunately this is because Square actually loses money on these sales, which you can confirm by looking at the public available interchange rates for Vis…
Square does high enough volume to negotiate better rates than you'd expect.
The size and strength of our payments and POS business have allowed us to develop a deep understanding of our sellers’ business performance and to build a cohesive commerce ecosystem. As such, we are well positioned to provide financial services and marketing services to sellers efficiently and intelligently. For example, one of our financial services, Square Capital, uses our deep understanding of our sellers’ businesses to proactively underwrite and extend cash advances to them. Although Square Capital is still in its early stages, we have already advanced over $225 million since launching it in May 2014. Square Capital demonstrates how our services can rapidly reach significant scale through a combination of strong demand and our direct, ongoing interactions with our sellers. Although Square Capital currently does not contribute a significant amount of revenue to our business relative to our payments and POS services, our software and data product revenue, including revenue derived from Square Capital, has grown quickly, and we expect these products will contribute a larger portion of our total revenue over time. Marketing services, such as Square Customer Engagement, give sellers easy-to-use tools to help them close the loop between communication with a buyer and ultimately a new sale. We currently see more than 1.5 million monthly feedback communications sent by buyers to sellers through digital receipts. Together, our financial services and marketing services provide sellers with access to capital and access to customers, making it easier for them to accomplish their goals. [0]
Transaction fees is a loss leader, but this isn't their business model. They'll make a majority of their profits on small business loans.
Example:
Local burger shop - I need a $10,000 loan to buy a new stove.
Square - Based on your commercial transaction history, we see you'll be able to pay the loan off in exactly 17.2 months. We'll give you $10,000 at $foo APR for 17.2 months.
[0] - Square S-1 https://www.sec.gov/Archives/edgar/data/1512673/000119312515...
Re: Square Prices Its IPO at $9, giving it a $2.7B valuation
#149Can 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…
It all depends on the start up. Some start ups have a lot of authorized shares and some have less. This is all reflected in the capitalization table ( https://en.wikipedia.org/wiki/Capitalization_table ) of the company. The cap table also contains information such as the number of preferred shares and different rounds of preferred shares (Series A, B, ...). What people sometimes don't realize are the liquidation pref…
What you may not realize is that in a qualified ipo the prefs go away. It's basically the one time when prefs turn irrelevant. (there are still other shenanigans like ratchet to min price sometimes).
In practice the qualifier on the ipo means the prefs only vanish on a big (well above the pref stack) ipo number. But still an ipo is at the moment it's done on paper much better for common holders.
Re: Square Prices Its IPO at $9, giving it a $2.7B valuation
#150Due to a string of bad decisions, including but not limited to the Starbucks deal and the Square Wallet, Square's undervalued. If they can sit up and grow their processing volume, their share price will appreciate greatly and go much higher than $9. They also need to find a way to minimize their losses on low amount payments, since they make losses on some of them. Their small business loans seem like an interesting and propitious part of their overall business going forward.