If having to slash valuations by 30% from the latest private financing round [6] was not bad enough, Square's IPO just priced notably below the expected (already lowered) range of $11-13 (and even further below the $15.46 at which it raised private money last year):
- *SQUARE SAID TO PRICE 27M IPO SHARES AT $9 EACH, REUTERS REPORTS
So from a private valuation around $6 billion to this, and along with Fidelity marking down its SnapChat valuation [7], it appears that without another massacre in a major city, risk appetite for these paper-behemoths may have gone the way of the mythical unicorn itself.
Square most recently raised $180 million in private funding at $15.46 per share, in a multi-stage Series E round stretching from September 2014 through just last month.
[8]
Square’s IPO comes at a time when it appears the company’s losses are growing and revenue growth is slowing. In its original S-1 filing with the SEC, Square reported a $77.6 million loss for the first six months of this year compared to a $79 million loss during the same period in 2014. Meanwhile, revenues rose to $560.5 million from $372 million during the same six months.
In a more recent third quarter filing, Square posted a loss of $53.9 million on $332.2 million in revenue, indicating slower revenue growth and widening losses than before.
As The Wall Street Journal reports, [10]
Skeptical investors forced Square Inc. to sell shares in its initial public offering for less than the mobile payments startup had hoped, dealing another setback to the battered market for new technology-company stock.
The six-year-old company, founded and run by Twitter Inc. Chief Executive Jack Dorsey, priced its shares at $9 late Wednesday. That is beneath the projected offering range of $11 to $13 and even farther below the $15.46 at which Square raised money last year from private investors.
...
“This deal is representative of companies that are falling out of favor with investors,” said Jeremy Abelson, portfolio manager at Irving Investors. “These are companies that are spending a lot to grow their top line but still have a tough path to profitability.”
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A bigger question, as we noted previously, [7]is whether it will be a controlled demolition as unicorns everywhere are demoted to what we first dubbed "zerocorn [6]" status in the coming days. To be sure, the VCs are desperate for a controlled demolition, and hoping the broader market ignores the euphoria that took place in Silicon Valley over the past 3 years, is now over, and that giddy investors overshot by at least 25-35% to the upside in the past several private funding rounds as everyone was rushing to pass the valuation hot potate to ever greater, and richer, fools.
It remains to be seen how successful they will be, and just what the source of capital for hundreds of "$1+ billion"-valued, cash burning companies will be in lieu of generous VCs, and just how viable the second tech bubble will be if these hundreds of companies suddenly are forced to generate cash flow to fund themselves.
One thing we know: there sure are many of them, as this infographic [11]from the WSJ proves:
[12]
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Which raises one interesting question...
When is $TWTR [13] buying Square? @Jack [14]
— 3:30 Ramp Capital™ (@RampCapitalLLC) November 19, 2015 [15]
