Square Looks To Raise Up to $333 Million as IPO Gets Closer

Square Inc. on Friday set a price range for its planned initial public offering of stock in which the high end could generate about $333 million for the merchant processor.

Square filed an amended registration statement with the Securities and Exchange Commission stating that it plans to sell 25.65 million Class A shares at an estimated range of $11 to $13 per share. At the $12 midpoint, the offering would raise $307.8 million before underwriting expenses. An $11 share price would raise $282.2 million, while a $13 price would raise $333.5 million.

An affiliate of The Start Small Foundation, a charity created by Square chief executive Jack Dorsey, plans to sell another 1.35 million shares. Proceeds from that sale will not go to the company, according to the registration statement.

Square’s shares will trade on the New York Stock Exchange under the ticker symbol SQ, the company revealed.

Square indicated it was planning an IPO last summer and filed preliminary paperwork under a federal law that lets start-ups give certain financial information to potential investors but not the public. In October, Square filed a standard registration statement with the SEC.

San Francisco-based Square has not said when or if it will go through with the prospective IPO. A spokesperson did not respond to a Digital Transactions News email requesting comment.

But if the IPO goes forward within the company’s expected price range, Square would have a market valuation of up to $4.2 billion. That would be considerably less than the $6 billion in estimated valuation after the company’s last funding round a year ago, Reuters reported.

Founded in 2009, Square started out offering mobile payment card acceptance to part-time sellers and small businesses using iPhones, then moved up to increasingly larger merchants, including Starbucks Corp. Today the processor has about 2 million of what it calls “sellers.” Small ones are still important, but less so than earlier. Excluding Starbucks, sellers generating $125,000 or less annually in gross payment volume currently account for 62% of GPV, down from 88% in 2011.

Transactions at Starbucks produced 11%, or $95.2 million, of Square’s total net revenues of $892.8 million for 2015’s first nine months. But Starbucks has proven to be unprofitable for Square and the relationship will end in 2016’s third quarter.

Square, which lost $131.5 million in 2015’s first three quarters, said in the filing that it expects to use the proceeds for “working capital and general corporate purposes.” Those purposes could include acquisitions of complementary businesses and technologies, or other assets, the company said.

One big unknown about Square involves Dorsey, its CEO and co-founder. Dorsey also is CEO of social network Twitter Inc., which he co-founded before leaving for Square, raising the question about whether either company can get sufficient attention from him.