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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

#61

Post by tomp »

fweespeech wrote: post #50
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.

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.

Except the long-term investors.

In any case, the predicted price before the IPO was exactly the IPO price. That's fair. If your view was that FB has a lot to grow and the IPO price is too low, you would buy it. If not, you wouldn't. Back then, nobody knew its price is first going down a lot, and then up even more.

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

#62

Post by nilkn »

trjordan wrote: post #58

If you think there's a tech bubble on because the latest private round came in higher than the IPO, consider what the explanation would be if the IPO valuation was 3x the VC round.

This could be evidence of the beginning of a balloon deflation rather than a bubble bursting.

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

#63

Post by sliverstorm »

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…

It seems like a good strong business could have been built on the initial function of accepting credit card payments. What if (I wonder) Square had stuck to that and not tried to become a huge multi-billion dollar company? There's lots of room in the world for modestly sized companies making respectable profits.

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

#64

Post by sliverstorm »

notJim wrote: post #55
sytelus wrote: post #53

Earlier quoted context omitted.

Square as well as Stripe have really changed PoS space. Before they arrived, the devices for PoS were truely ugly, unfriendly, hard to acquire and hard to use. I see tons of small businesses converting their PoS devices to Square/Stripe ALL the time. They are like iPhone for PoS. The potential is massive. They get huge amount of transaction data which alone is probably worth a billion dollars (customer habits, usage…

I think the problem is that though Square really did change things there (I agree w/ you), the space now is very competitive with a lot of different players, and it's not clear what Square can do that their competitors can't. It doesn't seem like there's really much lock-in or network effects that are helping them out.

At least for a while they had powerful brand name recognition and a head start.

Bigger, badder competitors (i.e. VISA) seem like they haven't been interested in competing with Square, and you can leverage momentum & recognition against smaller newcomers.

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

#65

Post by tosaket »

sytelus wrote: post #53
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…

Square as well as Stripe have really changed PoS space. Before they arrived, the devices for PoS were truely ugly, unfriendly, hard to acquire and hard to use. I see tons of small businesses converting their PoS devices to Square/Stripe ALL the time. They are like iPhone for PoS. The potential is massive. They get huge amount of transaction data which alone is probably worth a billion dollars (customer habits, usage…

They can easily expand, but they already have established competitors in that space, such as Xero and Quickbooks. Give a shot to Xero, it definitely has all the things you desire for.

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

#66

Post by drcode »

Technically, given that the last funding round had a stipulation saying "We'll give you more stock if the valuation falls short" I think it's arguable whether the public figures for the last round really represent a true valuation number.

I think a better headline would be "Journalists who reported the last valuation didn't dig enough to see that the contract actually stipulated a lower valuation."

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

#67

Post by potatolicious »

sliverstorm wrote: post #64
notJim wrote: post #55

Earlier quoted context omitted.

I think the problem is that though Square really did change things there (I agree w/ you), the space now is very competitive with a lot of different players, and it's not clear what Square can do that their competitors can't. It doesn't seem like there's really much lock-in or network effects that are helping them out.

At least for a while they had powerful brand name recognition and a head start. Bigger, badder competitors (i.e. VISA) seem like they haven't been interested in competing with Square, and you can leverage momentum & recognition against smaller newcomers.

I dunno, I think the effects of brand recognition is perhaps overstated. I think one of the chief problems Square has run into is that while their products are great, merchants are looking at the bottom line - they would pay for an inferior but functional PoS solution if it means cheaper rates.

Square has more recognition with the public at large - but that also has little pressure on merchant adoption. After all, you're not going to refuse to swipe your card at the coffee shop because their PoS isn't Square.

Anecdotally over the past couple of years I've seen a proliferation of other PoS systems (all iPad-based) at merchants around me that are decidedly not Square. Square may have carved out the market initially, but the vacuum is being rapidly filled with players that aren't Square.

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

#68

Post by harikb »

damoncali wrote: post #40
numlocked wrote: post #36

Earlier quoted context omitted.

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 mo…

> If you don't make any money, you don't pay anything

With the transactions, and hence Square's information, being several days ahead of the cash settlement, they might have preferential access to cash in order to recoup from a business that is about to fail.

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

#69

Post by jonknee »

MichaelGG wrote: post #37
chollida1 wrote: post #33

Earlier quoted context omitted.

>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 yo…

The rules aren't based on time, but basically on diversity of shareholders (there need to be a lot of shareholders and a lot of shares outstanding) which makes sense.

You need 7m publicly held shares outstanding (many IPOs don't do this, a lot of shares are controlled by underwriters and insiders who can't sell at the IPO) at least 2,000 shareholders and some minimum trade volume. There's a minimum share price too, but that doesn't effect IPOs.

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

#70

Post by jeffdavis »

angersock wrote: post #51
airza wrote: post #45

Earlier quoted context omitted.

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

It's not enough to be ubiquitous and useful in today's market. Think of the unicorns .

It depends on how you structure your business. If you structure it for hypergrowth, then maybe not.
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