SAN FRANCISCO – Mobile payment company Square plans to price its IPO at a lower value than expected, sending a message on Friday that could ripple across billion-dollar start-ups in Silicon Valley.
The San Francisco tech firm said in a regulatory filing that it expects to price its shares between $11 and $13, which at the high end would value the company at about $4.2 billion. That’s lower than the $6 billion valuation the company reportedly received at its last round of private financing.
“I think this is a monumental moment for technology growth companies,” said Gil Luria, an analyst with Wedbush Securities. “Up until now, technology growth companies have been able to stay private and continue to raise at increasingly high valuations and assume that eventually when they IPO they will get an even higher valuation. That’s falling apart with Square.”
The tech firm’s valuation, Luria noted, is coming down to a more reasonable level that the stock market is likely to accept.
“It’s not that Square will be priced at a bargain or a very cheap way. It will still be priced at premium to companies that are similar,” he said.
If the stock is priced at $13 per share, the company could raise $403.7 million in its IPO, the filing shows.
Overall, companies have been wary of going public this year and have either delayed their IPO or slashed the prices of shares they plan to publicly trade.
Payment processor First Data Corp., which made its public debut in October, priced its IPO below expectations at $16 a share.
But with Square expected to present the company to investors in an IPO roadshow next week, the tech firm also faces growing competition in the mobile payments business and has a CEO who is splitting his time between two companies.
In 2014, Square raked in $850.2 million in sales but also reported a net loss of $154.1 million, a filing to the U.S. Securities and Exchange Commission shows. For the first six months of this year, the company had a net loss of $77.6 million on revenue of $560.6 million.
That could make some investors wary, especially since there are plenty of other payment processing companies out there.
Square is expected to list its stock on New York Stock Exchange under the ticker symbol SQ.