Despite Low Priced IPO, Square Inc. Still Took Many By Surprise

 

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Finally, after long talks for months, SQUARE INC (NYSE:SQ) the San Francisco based payments and financial services company, went public on  Wednesday, 18th November 2015 and it definitely took many by surprise!

Square Inc. sold shares in it’s initial public offering for $9 per share, giving the company a market capitalization of $2.9 billion, a far below the $6 billion valuation it had earned from private investors. (More on the funding round)

Square and a selling stakeholder (who?) offloaded 27 million shares –  25,650,000 shares of the Company’s  Class A common stock and the selling stockholder as named in prospectus 1,350,000 shares of  the company’s Class A common stock. The company raised $243 million in the process.

That however, was not the initial plan! So what happened? It was estimated that the initial public offering price per share of  the company’s Class A common stock would be be between $11.00 and $13.00. Nevertheless, the stock price went up  as high as $14.78 once ordinary investors could buy the shares on the open market on Thursday. After trading over 47 million shares, the stock finally ended the day at $13.07, which was an a approximate over 45% gain! In a Interview with CNBC, Jack Dorsey, the CEO of both Square Inc and Twitter Inc, showed optmism and added it was not just about  the company’s trading stock but about growing the business.

There is no denying that, many who were doubtful because of the recent market conditions for IPOs. This was quite unusual for many investors and  among experts like professor Jay R. Ritter, of  University of Florida  who has been tracking IPOs for years. ( Jay R. Ritter also writes  about investing, with a focus on initial public offerings on Forbes)  For others, this was supposed to be a sign of doom!

So, what might the returns for the investors who got in early look like?  According to Business Insider, investors who valued the company at $6 billion last year also got an absolute deal! However, according to Bloomberg View, for a certain group investors, it was indeed a loss! And for others who had negotiated for themselves a “ratchet,” the game was fair as it had been agreed!

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