Mobile payments company Square Inc (NYSE:SQ) is set to price shares for its initial public offering late Wednesday in what is expected to be a harbinger for how other highly valued tech companies are received in their public debuts.
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San Francisco-based Square, run by Twitter Inc Chief Executive Jack Dorsey, is one of the most prominent "unicorns," or private companies valued at $1 billion or more, to plan a public debut this year.
This month it sent chills through the technology industry when it set the price range for its IPO at $11 to $13 a share, valuing Square at up to $4.2 billion, or 30 percent less than in a private fundraising round a year ago.
Other high-profile companies considered possible candidates for IPOs in the coming year include accommodations service Airbnb and online storage company Dropbox.
One-third of U.S.-based tech companies that went public this year priced their shares below their private value, according to data from market intelligence company Ipreo and data provider Pitchbook and analyzed by Reuters.
The valuation discount for Square, which will debut Thursday on the New York Stock Exchange, is among the steepest since the start of 2014, although it is below discounts of 40 percent for big-data company Hortonworks Inc and 32 percent for storage company Box Inc.
Founded in 2009, the company started as a way for small businesses to accept credit card payments through mobile devices. It now offers services ranging from loans to invoice software.
The company plans to sell 25.7 million Class A common shares, while a charity created by Dorsey is set to sell about 1.35 million.
"At this level, there will be appetite to invest," said Brendan Connaughton, chief investment officer at ClearPath Capital Partners, which has a client relationship with Square.
Investors attributed the discounted pricing in part to Dorsey's role at Twitter as well as steeper competition in payments from Apple and Amazon.
Square reported mounting losses for the first nine months of the year, compared with the same period in 2014, and slowing revenue growth.
Square this week touched on Dorsey's dual CEO roles in an updated IPO filing that states Dorsey will give his "full business efforts and time to the company, other than with respect to (his) work with Twitter Inc."
Goldman Sachs & Co, Morgan Stanley & Co LLC and J.P. Morgan Securities LLC are among 10 firms underwriting the offering.