Square

The stock price of Square Inc. (NYSE:SQ) surged 45% to $13.07 per share during its initial public offering (IPO). The company raised $243 million from its debut, and plans to use the proceeds for general corporate purposes.

Square offered its stock for $9 per share, below its planned range of $11 to 13 per share.  The company is not the only one that priced its IPO below the expected range this year. In fact, 35 out of 144 companies lowered their IPO price as of Wednesday.

Gil Luria, an analyst at Wedbush Securities told Bloomberg that Square was “willing to forgo $100 million plus of cash” the company truly needed to create an impression of a strong IPO by pricing its stock at $9 per share.

Market observers noted that Square’s offering price was not only below its proposed range, but also far lower than its$15.46 stock price during its last private funding round.

“It seems more like another payment processor that uses a little technology than a technology company. There is no way to put a smiley face on a price that is 40 percent below its previous valuation and nearly 20 percent below the low end of its projected offering range, ” Erik Gordon, a professor at the University of Michigan’s Ross School of Business.

In contrast, James Angel, an associate professor of finance at Georgetown University’s McDonough School of Business told Reuters, “The shares will do well given they have been priced far below their range and because there’s real opportunity for new startups.”

IPO will accelerate Square’s business

Jack Dorsey co-founded the mobile payments services company. He is the chief executive officer of both Square and Twitter Inc (NYSE:TWTR) at the same time.

In an interview with Bloomberg, Dorsey said, “It’s something that’s been a long road — it’s a milestone [referring to the IPO]. This is not something that you go around. This is what can accelerate us as a business.”

During the first nine months of this year, square recorded a loss of $131.5 million, and a 49% increase in revenue to $892.8 million.

Square sold 25.7 million millions shares while Dorsey’s Start Small Foundation sold approximately 1.35 million shares. Dorsey owns 21.9 percent stake in the company after the IPO.

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