Twitter’s Jack Dorsey set to pitch Square’s IPO
Jack Dorsey is looking to take Square public before Thanksgiving — and employees and investors alike are hoping this deal won’t be a turkey.
The 38-year-old NYU dropout — who became a billionaire after co-founding and now leading Twitter — is kicking off a road show this week to pitch Wall Street an initial public offering for the second, lesser-known payments company, where he is also founder and chief executive.
Besides Dorsey’s star power, insiders believe prospective investors will be swayed by financial chief Sarah Friar, a former Goldman Sachs banker who was plucked from cloud-computing giant Salesforce in 2012.
“Sarah is very strong in the CFO role and very good at selling investors,” said one Square shareholder.
Still, Square has suffered growing pains under Dorsey and Friar, particularly in 2014, when the company launched more than half a dozen new services, resulting in stalled projects and the shuttering of two of them — mobile wallets and Order, a restaurant pickup service.
“Jack seems to not really make it clear what he wants done,” said one source close to the company. “His subordinates didn’t necessarily feel empowered. People grasped at things trying to please him, and there’s a little bit of chaos.”
As a result, Square admits it is now back to square one this year, pouring cash into growing higher-margin services such as payroll, scheduling and its Square Capital merchant-finance unit, which now make up less than 4 percent of its business.
“They’ll have to show a slide at the beginning of their presentation saying, ‘Past performance is no guarantee of future results,’” quips a current Square investor. “With Square, we are only hoping that’s the case.”
Key selling points will include Square Capital, a small-business lending unit whose brisk growth has sparked strong morale inside the company, insiders said. At the end of September, Square Capital had lent $300 million through more than 50,000 advances, up from $225 million in June, according to filings.
A Square spokeswoman declined to comment, citing the quiet period ahead of the IPO.
Early investors took their lumps Friday, when Square priced its IPO between $11 and $13 a share, giving it a market value between $3.6 billion and $4.2 billion. That was painfully short of the $6 billion valuation fetched in recent, private rounds.
That, in turn, triggered so-called “ratchet” provisions that guaranteed a 20 percent return to recent, big-name investors including JPMorgan Chase, Rizvi Traverse and Goldman Sachs. The guarantees will be paid off in the form of additional shares that will dilute earlier investors.
Friday’s bad news wasn’t a total shock inside Square’s San Francisco offices, which house more than 1,200 employees. While some observers speculated the rock-bottom pricing might spark a reduction in employee ranks, most seemed inclined to take the long view.
“No one’s super-happy about it,” a Square source said. “But people are telling themselves, ‘Oh, well, seems like they are starting low. Better to price it where something will pop than to come out with something that looks like a dog.’ ”