Jack Dorsey developed Square's signature card reader and made waves in the mobile payments world after he was removed from Twitter in 2008. It's been a rocky ride since, but as the Verge notes, the company processed $23.8 billion in payments last year alone, which is nothing to cough at. Now Dorsey is back on top at Twitter while still helming Square, which today became a publicly traded company. What an exciting time for them! Maybe a little too exciting.
Among investors and in the media, the market's reaction has become a referendum on the whole of the Wall Street Journal's not-so-exclusive unicorn society, a term that refers to businesses valued at $1 billion or more before an IPO. Could they be over-valued? That's between them and the gods of the marketplace.
As Wired pundits point out, the company's eventual $9 share price is below the $11 to $13 range Square proposed and very much at odds with the $15.46 price per share private investors paid during an investment round last year. Indeed, at that $9 price, Square's market cap is $2.9 billion, which the the Business Times calls "painful."
But it doesn't look so terrible in the light of day. Venturebeat is keeping score, and have it that trading began at $11.20 a share on the New York Stock Exchange, with the stock up 42 percent from market open and rising a bit.
New York Magazine's analysis: this "shows why this tech bubble is different, and less dangerous, than the last one."
How many would be worth less than the valuation last given to them by private investors? Back in the bubbly days of the late 1990s, the answers to those two questions would probably have been “all” and “none.” Companies took private money, built a business, and rushed to the public markets, with their shares often surging to irrational values as soon as they hit the exchanges, meaning big paydays for early funders.
Wired tells a bit of a different story, more of the all-or-nothing one NY Mag is avoiding, with a URL indicating an "end time" for unicorns. Specifically, they cite the "ratchet" arrangement, a protection for late investors, as a poor omen.
The arrangement puts early stage investors and even early employees at a distinct disadvantage compared to late stage investors, who are guaranteed a payout no matter the outcome. Viewed that way, it’s hard not to see these deals as a product of an environment in which private companies are drastically overvalued. Even as they drive private company valuations higher and higher, these heavyweight investors are simultaneously hedging their bets, negotiating safety nets to protect themselves when a company’s public offering inevitably disappoints.
If you're looking for a piece of the action yourself, Square is now trading under the ticker symbol “SQ.” Buy! Sell! You tell Square what you think it's worth.
Previously: Jack Dorsey Giving Half His Square Equity To New Foundation Helping Ferguson, MO