Jack Dorsey's Square seeks over $500 million in IPO

Square was founded by Twitter’s Jack Dorsey.
Square was founded by Twitter’s Jack Dorsey.REUTERS

SAN FRANCISCO (AFP) - Mobile payments startup Square said Friday it will raise up to US$403 million (S$567 million) in its stock offering - but it may be valued less on Wall Street than by private investors.

The company founded by Twitter's Jack Dorsey - who is chief executive of both firms - said in an updated regulatory filing it would sell 27 million shares in a range of US$11 to US$13, with an option to sell an additional four million shares depending on demand.

The initial public offering (IPO) price range suggests a market value for Square of just over US$4 billion - well below the US$6 billion value assigned by private investors in its latest funding found.

Some analysts have warned of a tech bubble in the private markets, with dozens of firms getting a value of over US$1 billion - "unicorns" in Silicon Valley parlance - without enough scrutiny over their financial prospects.

Square, which started in 2009 by providing financial transactions software for smartphones or tablets along with free "dongles" that plug into devices for reading magnetic strips on payment cards, is among prominent unicorns in startup rich Silicon Valley.

A total of 23 unicorns were created in the past quarter - 17 in the United States - bring the total to 58 so far this year.

According to CB Insights, there are 143 unicorns worldwide with a combined valuation of US$508 billion.

Square nonetheless "has been a highly anticipated tech IPO that has the potential to be one of the largest of the year," said a note this week from research firm PrivCo.

"It also comes at a time when the IPO market, especially for tech IPOs, has seen a dramatic decrease in activity due to economic uncertainty."

One major question for investors is whether Dorsey, who last month retook the reins at struggling Twitter, can effectively lead both companies.

In addition to the United States, Square has operations in Canada, Japan and Australia and claims to have "millions" of users around the world, ranging from independent craftsmen who use its dongle to accept credit card payments to large chain stores.