Square’s IPO valuation lower than expected

Payments startup Square said Friday it plans to go public with a market value between $3.6 billion and $4.2 billion — well short of the $6 billion valuation it fetched in a private funding round a year ago.

The San Francisco-based company — whose CEO, Jack Dorsey, holds the same job at Twitter — said it expects its initial public offering to price at between $11 and $13 per share, raising about $324 million.

When Square filed for its IPO on Oct. 14, it originally set a fundraising target of $275 million.

The shortfall on valuation will trigger a so-called “ratchet” provision to protect investors in the $150 million funding round last year, who had been guaranteed a 20-percent return on their investment, according to filings.

Accordingly, Square will dole out more than 5 million additional shares to those investors, including JPMorgan Chase and the investment firm Rizvi Traverse, filings show.

On Friday, Square said it would sell 25.7 million Class A common shares in the IPO, expected later this month.