Will Square's IPO be a success with chief executive Dorsey distracted by Twitter?

Madeline Ratcliffe
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Founder and chief executive Jack Dorsey (Source: Getty)

Another day, another IPO – this time it's Square, the mobile payments company founded after Jack Dorsey was forced to leave Twitter, which has ended months of speculation by officially filing with the Securities and Exchange Commission to go public.

Square is looking to raise $275m (£177m) from the IPO.

In its filing, Square, which was founded in 2009, listed risk factors that included the suggestion chief executive Dorsey may not have enough time for Square now he's taken the helm at Twitter, saying:

Jack Dorsey, our co-founder, president, and chief executive officer, also serves as chief executive officer of Twitter. This may at times adversely affect his ability to devote time, attention, and effort to Square.

Last week Dorsey was appointed as the permanent boss of Twitter, and promptly announced job cuts in an effort to return the social network to growth.

While revenues have been increasing at Square, $560.6m for the six months to June, the company is still making a loss, and was down $77.6m over the half year period, and an accumulated deficit of $473.2m.

The company warned in its prospectus that its "growth may not be sustainable", and expected revenues to fall, especially as it intends to "invest substantially," further eating away at profits.

It also warned that Starbucks had ended their exclusive partnership ahead of the agreed date in 2016, and was using another payments processor, which could "meaningfully decrease our total net revenue in the future."

The much-vaunted Starbucks partnership has not been a success: the company revealed that for the six months ending June 2015 the gross loss related to payment processing for Starbucks was $14.3m, after a loss of $27.9m for the whole of 2014.

Square was reported to have filed for an IPO privately this summer (an option available for companies with less than $1bn in revenues) and was valued at $6bn in October 2014.

In that financing round private equity firm Rizvi Traverse and JP Morgan's Strategic Investments arm invested in some £150m of stock, at $15.46 a share.

These early birds will get the worm: they are guaranteed at least 20 per cent returns from the IPO, and if the company's price tanks below $18.56 they will be issued with additional shares to make up the loss, Buzzfeed reported.

Goldman Sachs, Morgan Stanley and JP Morgan are acting as lead joint book-running managers. Barclays, Deutsche Bank, Jefferies, RBC Capital Markets, and Stifel are additional book-runners, and LOYAL3 is co-manager.

Twitter's share price closed up 1.10 per cent in New York yesterday.

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