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Tech Bubble Unravelling: Square To Go Public At 30% Discount To Latest Private Round
Two weeks ago, we reported that one of the numerous "unicorns" prancing around Silicon Valley was about to have a very rude wake up call when Dropbox was warned by its investment bankers that it would be unable to go public at a valuation anywhere near close to what its last private round (which had most recently risen to $10 billion from $4 billion a year ago) valued it at.
And while Dropbox's day of public reckoning approaches, another company realized today just how big the second "private" tech bubble, one we profiled first in January of 2014, truly is. That company is Jack Dorsey's Square, which earlier today filed a prospectus in which it said that the "initial public offering price per share of Class A common stock will be between $11.00 and $13.00."
Assuming a mid-point price of $12 and applying the 322.9 million shares outstanding after the offering, it means a valuation of $3.9 billion. The problem is that in its last private fundraising round, Square was valued at about $6 billion according to ReCode.
Needless to say, IPOs are meant to come at a valuation that puts all the prior rounds of private investors "in the money." Not this time.
What does that mean, especially since as BuzzFeed reported previously, Square’s last round of private financing guaranteed investors at least a 20 percent return on investment.
Well, it means that if Square’s IPO share price was less than $18.55, Square would have to issue these Series E investors shares to make up the difference, or an automatic dilution for everyone else. And since that looks increasingly likely, and if Square ends up pricing its IPO at $12 a share — the midpoint of today’s range — it would have to issue these investors around 5.3 million additional shares, representing around 1.6 percent of all outstanding shares, according to today’s filing.
ReCode concludes what we said nearly two years ago:
Square’s IPO pricing will likely give credence to the growing belief that there are a whole host of private companies valued at $1 billion or more — “unicorns,” in Silicon Valley parlance — that wouldn’t sniff such a high valuation if they decided to go public. Square’s revenue is growing quickly, but the company is still generating large losses.
So the question facing all the other unicorns is simple: will they keep jumping from private round to private round, funding operations while increasing the valuation of the underlying to absolutely ludicrous levels, ones which can never be "cashed out" using a public route and pray for a strategic to swoop it up instead, or will the Valley finally have a rude wake up call, admit the past two years of bubble valuations were driven not by fundamentals but by excess liquidity, and scramble to go public in an attempt to cash out first before everyone else does?
We will know on December 16: if the Fed indeed does launched tightening by hiking 25 bps, watch as a record number of unicorns are downgrade to zerocorns in the nanosecond blink of an algorithmic CCD.
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That is 30% MOAR AWESOME!
You fucked up, you trusted us. I've made my living in he computer industry fo decades and I watched the circus create itself and now the clowns have made impossible promises that will collapse the Silicon Valley opium dream.........
If the CEO wasnt such a SJW, he might have been able grow the brand instead of prohibiting purchases of guns and ammo from using the Square platform.
Fuck him right in the pussy.
Silicon Valley is in its 11th hour of existence. Banksters ruined it and the Grim Reaper wants his own.
I like to pop Bubble wrap. The sound soothes me.
Soothes me also but my dogs fucking hate it!
Bubble wrap has unicorn farts in the bubbles
It's still high-dollar asswipe, no matter how you price it.
Square is Rounding Down, you might say.
<<Assuming a mid-point price of $12 and applying the 322.9 million shares outstanding after the offering, it means a valuation of $3.9 billion. The problem is that in its last private fundraising round, Square was valued at about $6 billion according to ReCode. >>
WTF do they do that would make them worth 3.9-6 billion in the first place?
That's the question that could be asked about numerous companies not making much tangible, if anything.
Can you really put a price on dreams? Or hope? Or hope and dreams? Or dreams of hope about change? Or dreaming about pictures of food you're eating and hoping about dreaming? Can't put a price on that!
you could've continued with the permutations.
They make a little square that plugs into your iPoop's phone jack and lets you do credit card payments, cuz cash is for obsoleted grampas like me (and I aint hit 30 yet).
An end-to-end HW/FW/SW solution - great... I have dished those out for useful products for a pittance like my predecessors in the electronics industry. If I can see further, it is on the shoulders of my mentors and those who worked their asses off in this field. If companies like Square can venture further, it is on the dime of VCs, et al.
Let's see these faggots make a real scientific instrument for starters, and I might have a shred of respect to spare.
...so something cutting edge like what paypal has been doing for the past several years......everypenny of $5B, no doubt /s
The only thing gayer than the homos in SF are the startups.
Are you 13 or 14 this year?
I identify as 13 but I'm actually 14. I'll call the PC police if you hate on my specialness.
I didn't know they had a special unit for that jurisdiction. I just assumed it was handled within the broader PD.
pan handler at the Embarcadero in San Fran told me i had to get in on this sure winner stawk...
seemed like he knew what he was talking about...
im in.
did he have square so you can give him a handout?
Looking forward to seeing the evisceration of the techies yet again. Good luck finding renters for your $4K/mo 1bd when they're all out of a job.
Most of the 'techies' are either not techies at all, or they're foreigners. SV hiring of US citizens under 40 has been scant since the first dot-com bubble.
"pre-revenue" is what you want...
https://m.youtube.com/watch?v=BzAdXyPYKQo
FUK U, FANBOIZ!!!!!!!!!!! BASTARDS!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
The crack of doom is coming soon
https://m.youtube.com/watch?v=5U319VzSqEU
and so, your ipo has failed
you've made the progress of a snail
don't worry, it will all be over soon...
Making almost a billion in revenue but losing almost 200 million doing so is not a good IPO starting point.
They should have launched a year ago but got greedy. Now there trying to raise 300 million with IPO that will only buy them two years at current rate of loss.
Actually looks like they do have a real business model unlike most of the vaporware unicorns prancing about though.
Fundamentals never matterm. All that does is stock price going up. That's what people don't get.
All those flying unicorn hallucinations, happily burning Wall Street freshly printed money for pleasure of boyish forty something LGBT crowd from Silicon Valley including Indian and Chinese VCs. All lost in a group psychotic delusion of grandeur of their useless creations.
More on Silicon madness can be found at:
https://sostratusworks.wordpress.com/2015/01/08/smell-of-silicon-madness...
airbnb said today that they are stronger than the NRA.
and their hosts and users can pop up like a protest flash mob.
no foolin, these creeps are delusional.
reminds me of 1999 when the little shits took investors money and installed bowling alleys in the basements of their offices.