Square Files for IPO, Seeks Listing on NYSE

TL;DR

Square filed for an IPO with an initial offering size of $275 million and sought to build on rapidly rising revenue. Its revenue increased more than 50% in the first half of the year and 63% last year, but payments processing still generated 95% of revenue. Read on to understand Square’s diversification plans, Jack Dorsey’s dual leadership role, and competitive pressure from PayPal and Stripe.

Transcript

mobile payments company Square filing for that IPO with an initial offering size of $275 million the S1 filing revealed what's going on behind the scenes at this company which just seen Revenue jump more than 50% of first half of this year so Bloomberg News is Reed Stevenson joins us now from San Francisco to dig through these details so Reed I kno... Read More

Key Insights

• Square has filed for an IPO with an initial offering size of $275 million, indicating its intent to expand its market presence and investor base.
• The company's revenue has increased by over 50% in the first half of the year, showcasing strong financial performance and growth potential.
• Square's core business is payments processing, accounting for 95% of its revenue, which poses a risk due to lack of diversification.
• To mitigate risks, Square is diversifying by offering credit to small and midsize businesses and providing software solutions for payroll and inventory management.
• Jack Dorsey, CEO of both Square and Twitter, is seen as a potential risk due to the challenge of managing two companies during sensitive periods.
• The IPO comes at a time when other companies like First Data have faced challenges in the public market, indicating potential volatility for Square.
• Square faces competition from major players like PayPal, which is now independent from eBay and is expected to become more aggressive in the market.
• The mobile payments industry is becoming increasingly competitive with new entrants and existing players like Stripe looking to capture market share.

Questions & Answers

Q: Why did Square file for an IPO?

Square filed for an IPO with an initial offering size of $275 million after a period of strong revenue growth. Its S-1 showed revenue rising more than 50% in the first half of the year and 63% last year.

Q: How much of Square’s revenue comes from payments processing?

Payments processing generates 95% of Square’s revenue. The concentration is a risk, although payments processing remains the company’s core business.

Q: How is Square diversifying beyond payments processing?

Square is branching into credit for small and midsize businesses, which could help it retain those companies as loyal customers. It is also offering software for payroll, inventory, and other business operations.

Q: What did Square’s S-1 reveal about its financial performance?

The filing showed that Square’s revenue increased more than 50% in the first half of the year. Revenue was also up 63% last year, presenting the company as a fairly healthy business despite earlier concerns.

Q: How did the Starbucks deal affect concerns about Square?

There had been concern that Square’s deal with Starbucks would drag on the business. The discussion of the S-1 indicated that the issue appeared to be moving toward a resolution.

Q: Why is Jack Dorsey’s leadership of Square and Twitter considered a risk?

Jack Dorsey was running both Square and Twitter while each company was in a sensitive period. Twitter was reorienting itself with a new CEO and new products, while Square was navigating the risks of an IPO.

Q: What did First Data’s public offering suggest about Square’s IPO risk?

First Data, another payments company, went public and priced below its initially indicated share price. Its shares were also described as falling almost 2% before recovering somewhat, illustrating the uncertain public-market environment Square faced.

Q: Who were Square’s major competitors in mobile payments?

The discussion identified PayPal and Stripe as notable competitors in the payments market. PayPal had recently become independent from eBay and was expected to become more aggressive with innovative products aimed at capturing part of the mobile-payments market.

Summary & Key Takeaways

• Square Inc., a mobile payments company, has filed for an IPO with an initial offering size of $275 million. The company has seen significant revenue growth, with a 50% increase in the first half of the year. Despite its reliance on payments processing, Square is diversifying its offerings to mitigate risks.

• Jack Dorsey, CEO of both Square and Twitter, faces challenges in managing both companies during critical periods. Square's IPO comes amidst market volatility, as seen with First Data's recent public offering. The company is expanding into credit and software services to strengthen its market position.

• Square is up against strong competition in the mobile payments space, with PayPal and Stripe being notable contenders. As PayPal becomes more aggressive post-eBay, Square's strategic diversification and growth initiatives will be crucial to maintaining its competitive edge and attracting investors.