Square, the mobile payments startup created by Twitter (TWTR) founder Jack Dorsey, has postponed its IPO indefinitely, FOX Business has learned. People with knowledge of Square’s finances have indicated that the company is not ready to go public this year.
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The San Francisco-based Square had been taking steps towards a public offering, meeting with Nasdaq executives as recently as the fourth quarter of 2013, according to a person familiar with the situation. Around that same time, it was reported that Square had been discussing a 2014 IPO with investment bankers.
But in recent weeks, people close to Square have indicated to Wall Street executives that a 2014 offering is unlikely because the company has run into problems with its “revenue run rate,” a key projection of future performance. It has been reported that Square is unprofitable, but that 2013 revenues exceeded $100 million.
Square’s “private-market valuation could not be substantiated by their revenues as a public company,” said one person with knowledge of the company’s activities. Square has raised capital at a $5 billion valuation and would have trouble achieving that market cap in public markets.
Square has raised $341 million in venture capital, dating back to late 2009. Sequoia Capital, Kleiner Perkins, First Round Capital, Ron Conway, Dennis Crowley and Marissa Mayer are amongst Square’s lengthy list of investors. Square has also received capital from public corporations, including Starbucks (SBUX) and Visa (V).
Square recently released one million secondary shares, meaning that many Square employees have opted to sell their stake in the company. FBN’s Maria Bartiromo learned that $200 million worth of shares went to Prince al-Waleed, who also invested in Twitter.
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If Square does not eventually go public, it would be expected to sell itself in order to provide an exit for investors. Banks or credit card companies may be interested in purchasing a company like Square.
“Square is much more valuable synergistically as part of a larger company,” says Sam Hamadeh, CEO of Privco. Predicts Hamadeh, “Amazon, Microsoft, Apple or another large acquirer will step in to prevent a final IPO.”
The mobile payment industry is saturated with competition; PayPal and Bank of America (BAC) have competing products. LevelUp offers a similar service and GoPago was recently purchased by Amazon (AMZN).
A spokesman for Square declined to comment on the company’s IPO plans; a Nasdaq spokesman also declined to comment.