U.S. Processor Offerings Didn’t Generate Much Spark in 2015’s IPO Market

Payment processors Square Inc. and First Data Corp. made headlines in 2015’s market for initial public offerings of stock, but neither company was a standout, according to recent market reviews.

In fact, a new analysis by PitchBook, a Seattle-based provider of a data-analysis platform for venture-capital and other financial firms, lists Square’s Nov. 19 stock sale in its “loser” category for last year’s IPOs. The report notes the sharp difference in valuations that investors can assign to tech companies after they go public compared with their valuations when they were privately held.

According to PitchBook, a private investment in Square in October valued the company at $6 billion. “But when [Square] went public a month later, it saw its value drop to $4.7 billion,” the report says. “The company priced its shares at $9, less than the estimated price range it had filed of $11 to $13.”

The report also says Square’s capitalization is now about $4.1 billion, nearly $2 billion less that its private valuation.

A spokesperson for San Francisco-based Square did not respond to a Digital Transactions News request for comment.

To be sure, PitchBook notes that 2015 was a rough year for IPOs thanks to persistent volatility in the public securities markets. The unrest stemmed from everything from the financial crisis in Greece, which threatened the euro currency, to sell-offs of junk bonds, according to the report.

In all, 72 companies backed by venture capital went public in 2015, raising $8 billion. That’s down from 123 deals that raised $11 billion in 2014, according to PitchBook.

A year-end review by Greenwich, Conn.-based Renaissance Capital LLC says global IPO issuance in 2015 was down 35% from “2014’s blockbuster year” and raised only $156.5 billion in 310 deals of $100 million or more. Some 417 IPOs in 2014 raised $241.5 billion.

Two processors are on Renaissance’s ranking of 2015’s top 10 global IPOs. Atlanta-based First Data, whose Oct. 14 IPO raised $2.56 billion, ranks tenth. As of Dec. 31, however, the IPO had produced a 0% return, the report says. London-based merchant processor Worldpay, which has major U.S. operations, ranks ninth, having raised $3.32 billion in its IPO just two days before First Data’s. As of Dec. 31, Worldpay’s IPO had produced a 20.1% return.

First Data priced its IPO at $16 per share, down from the $18 to $20 per share it had hoped for shortly before the sale. Despite the lackluster IPO, First Data raised enough equity to begin reducing its nearly $21 billion in debt and refinance some of its borrowings at lower interest rates.

Another big merchant processor, Hauppauge, N.Y.-based TransFirst Holdings Inc., filed documents in October for a prospective IPO but hasn’t yet completed the transaction. A TransFirst spokesperson did not reply to a Digital Transactions News email asking about the IPO’s status.