Payments Startup Square Discloses IPO Plans
Offering comes as market for IPOs remains shaky
Payments startup Square Inc. officially filed to go public Wednesday, a move that comes as the market for initial public offerings remains shaky.
Square’s IPO could test the market for tech offerings, which has been quiet as more companies raise large rounds of private capital and their valuations have stretched into the billions.
The San Francisco maker of credit card-reading devices filed to offer up to $275 million in stock, but that amount may be a placeholder used to calculate registration fees and is subject to change. The company plans to trade on the New York Stock Exchange under the symbol SQ.
The sharp stock-market swings of late August and September have deterred some companies from pursuing offerings. Luxury retailer Neiman Marcus Group Inc. on Tuesday said it would delayed its planned IPO amid the recent volatility. Meanwhile, supermarket operator Albertsons Cos. and First Data Corp., expected to be two of the largest offerings of the year, are set to price after the close.
Square’s filing follows The Wall Street Journal’s report in July that the company filed for an offering under the Jumpstart Our Business Startups Act, which permits companies with under $1 billion in annual revenue to file their IPO paperwork confidentially.
Square has been in the spotlight because of Jack Dorsey’s dual role as Square’s chief executive and his recent return to the top spot at Twitter Inc. Mr. Dorsey, who is 38 years old, co-founded Square after leaving Twitter in 2008.
He owns 24.4% of Square, according to Wednesday’s filing, while venture-capital firm Khosla Ventures holds a 17.3% stake.
The road to an IPO could answer some of the questions hanging over Square, a six-year-old company which takes its name from the shape of its small gadgets that plug into smartphones and tablets to process credit cards.
Last year, Square’s loss widened to $154.1 million from $104.5 million. But revenue totaled $850.2 million, up sharply from 2013’s $552.4 million. Transaction revenue provided $707.8 million of the total.
Starbucks Corp. has been a prominent venue for Square, which has a line in its financial statements singling out Starbucks transaction revenue, a figure totaling $123 million last year.
However, Square warns in the risk factors section of the filing that it anticipates Starbucks will transition to another payment processor and will cease using its payment processing services prior to the scheduled expiration of their processing agreement next year. It added its revenue may decrease meaningfully in the future.
For its part, the coffee retailer has said it will begin accepting Apple Pay in some U.S. stores this year.
Square gives its devices away and charges 2.75% of each transaction. It has become the de facto payment system for taco trucks, coffee shops and cab drivers, among others, spawning copycats like PayPal’s Here card-swiping device and similar systems from Amazon.com Inc. and Intuit Inc.
The recent spinout of PayPal Holdings Inc. from its former parent eBay Inc. could set a bar for investors trying to assign a public-market value for Square.
U.S. listings had raised about $30 billion through the end of Tuesday, compared with $82 billion by that point last year and $42 billion in that periodof 2013, according to Dealogic.