Square Files for IPO despite of $77.6 million loss
A San Francisco-based payment startup, Square Inc. had filed to go public on Wednesday and according to its regulatory filing, the company will offer around $275 million in stock. The company which is run by Twitter Inc. co-founder, Jack Dorsey is currently valued at a total $6 billion in valuation.
TechCrunch reported that Square Inc. recorded a total revenue of $560.6 million during the first quarter of the year and a loss of $77.6 million. And according to its filing for IPO as reported by The New York Times, the company managed to increase its revenue to $850 million so far for this year.
According to The Wall Street Journal, Square sales rose 54 percent on 2014 and that the company is expected to obtain $1 billion in sales by the end of this year. The increase in sale comes largely from its deal with Starbuck which saw Square managed to rake in $62.9 million in revenue from Starbuck alone.
However, the company also recorded an increase in its loss which could potentially reduce its value. According to a report, Square Inc. recorded a total loss of $154.1 million by the end of 2014 an increase of around $50 million in loss compared to 2013.
Besides the low margin of revenue and the increasing amount of losses, investors are also worried about Square unusual corporate structure. According to the current management board, it is high likely that the CEO, Jack Dorsey will be having trouble to devote his time to run both Square and Twitter at the same time. Besides that, Jack Dorsey the co-founder and CEO is also the biggest shareholders with 24.4 percent stakes compared to Jim McKelvey, who owns only 9.4 percent stake.
Even with the problem that the company is facing, the $6 billion in valuation company still managed to attract a long list of backers. This is proved since the company managed to obtain $600 million of investment from companies in Silicon Valley alone. Besides that, other big corporation including Khosla Ventures, J.P. Morgan Chase & Co, and Sequoia Capital are among its shareholder.
The trend for the tech company to go public has seen a steep decline in 2015 as only 22 company had filed for IPO this year compared to 53 in the third quarter of 2014. This is due to the recent market uncertainty that lead to some tech IPO to flop after it starts trading. This includes shares of AliBaba and Box.