Square lowers aim on IPO to $4.2bn

Square Inc is aiming for a valuation of as much as $4.2 billion (€3.9 billion) in its initial public offering (IPO), well short of the $6 billion the mobile-payments service sought in its latest funding round. The large gap underscores a lingering question of valuation for the latest crop of startups:

The company, founded and led by Twitter chief executive Jack Dorsey, plans to market its shares at between $11 and $13 apiece, according to a regulatory filing on Friday. The IPO will include about 27 million shares of the 323 million that will be outstanding after the offering. There is an option to set aside an additional four million shares to underwriters, meaning Square may seek to raise more than $400 million.

Square had been in talks for funding at a $6 billion valuation in August 2014, a person with knowledge of the matter said at the time. The company’s venture-capital investors include Sequoia Capital, Khosla Ventures and Kleiner Perkins Caufield and Byers.

Dorsey has said Square co-founder Jim McKelvey came up with the idea for the company when he was trying to sell his art and found the process for setting up a merchant account “painful”.

Square, which is mainly used by small businesses, uses a smartphone application that connects to a terminal. Square, started in 2009 in San Francisco, is raising funds to generate working capital and may also use some of the proceeds to acquire complementary businesses and technology, the company said.

Net revenue rose to $850.2 million last year from $552.4 million in 2013, Square said in the filing. Revenue was $892.8 million for the first nine months of this year. Square warned that the revenue growth rate will probably decline and the company is unprofitable. – (Bloomberg)