Square goes public; aims to raise USD 275 mln

Although in 2015 (through June 30), the company’s revenue was USD 560.0 million compared with USD 850.2 million the previous year, Square is inching toward profitability. In the second quarter of 2015, it reported USD 859,000 in adjusted EBITDA. The company also enjoys sizable gross profit margins of about 36%.

In the filing, Square said that 95% of its revenue come from payments and point-of-sale (POS) services, not ancillary services like cash advances to merchants.

Dorsey owns 24.4% of Square. The company’s next largest individual shareholder is cofounder Jim McKelvey, with 9.4%. Square’s biggest venture investor is Khosla Ventures, with 17.3% of the company. JP Morgan owns approximately 5.5% of the company, and Sequoia Capital and Rizvi Traverse, 5.4% each. Kleiner Perkins Caufield & Byers owns about 3%.

Square’s IPO will be led jointly by Goldman, Sachs & Co., Morgan Stanley, and J.P. Morgan and the company will trade on the New York Stock Exchange under the SQ symbol.<
Valued at USD 6 billion as of a funding round in Oct. 2014, six-year-old Square said in its IPO filing that it’s seeking to raise USD 275 million, a figure which is likely just a placeholder and may be increased as the company moves closer to listing.

Among the risk factors highlighted by the company is its ability to retain top executives, including Dorsey, as well as Dorsey’s role as CEO of Twitter: “This may at times adversely affect his ability to devote time, attention, and effort to Square,” the company wrote.

The company also warned that its partnership with Starbucks could affect results even as it ends and anticipates that Starbucks will transition to another payment processor and will cease using Square’s payment processing services prior to the scheduled expiration of the payment processing agreement with them in the third quarter of 2016.

Square also faces the risk of fraud and disclosed that this year, it lost more than USD 5 million in fraud to a single scam artist: “In the three months ended March 31, 2015, we recorded a loss of approximately USD 5.7 million related to fraud by a single seller using our payments services,” the company said.

Founded in 2009 by Twitter cofounder Dorsey and McKelvey, Square started as a company that made it easier for small business owners to accept credit card transactions with their mobile devices. Among its first products was a credit card dongle that connected to a user’s smartphone through its headphone jack, turning that device into a mobile register.

Over the years Square has expanded into other small business offerings including cash advances, peer-to-peer mobile money transfer, and marketing and payroll software, which was launched earlier this year.