SAN FRANCISCO — Square, the digital payments company run by Jack Dorsey, has filed paperwork for an initial public offering.
The company which is valued by private investors at $6 billion made the announcement after the markets closed on Wednesday. Square said it intends to list its common stock on the New York Stock Exchange under the ticker symbol “SQ.”
Square is in the spotlight because of its 38-year-old founder. Dorsey last week was named CEO of Twitter, which he also co-founded, meaning he will soon run two publicly traded companies.
The filing comes about three months after Square filed confidentially for an IPO, taking advantage of the Jumpstart Our Business Startups Act, which allows companies with less than $1 billion in revenue to quietly and privately file IPO paperwork with the Securities and Exchange Commission. Twitter also chose to file its IPO paperwork this way.
Goldman, Sachs & Co., Morgan Stanley and J.P. Morgan are managing the Square deal, along with Barclays, Deutsche Bank Securities, Jefferies, RBC Capital Markets, and Stifel. David Viniar, the former Goldman Sachs chief financial officer, joined the Square board in October 2013. Goldman Sachs was the lead banker on the Twitter IPO.
According to the S-1 filing, which provides the first glimpse at the finances of the six-year-old company, Square’s loss last year grew to $154.1 million from $104.5 million. Revenue totaled $850.2 million, up from $552.4 million in 2013.
“The strength of this business is more than the money it generates,” Dorsey wrote in the filing. “As a public company our decisions will continue to reflect what we’ve done as a private one — we put our customers first. That means constantly asking the question: How can the financial system better serve people? We’ll measure ourselves by our commitment to take the long view and focus on building a company that creates value over decades and not just a few fiscal quarters out.”
Dorsey owns nearly 25% of Square, according to Wednesday’s filing.
Forrester Research analyst Brendan Miller says Square has a number of advantages as well as challenges as it heads for an IPO.
Square takes its name from its gadgets that plug into smartphones and tablets to process credit cards. It gives away the gadgets and charges 2.75% per transaction.
Square has developed strong brand awareness with consumers and merchants by riding the coattails of two major market shifts: tablet computers replacing traditional point-of-sale systems and the ability to deliver software from the cloud, Miller said. Making Square attractive to small merchants: simpler contracts and pricing as well as additional services not offered by other payments providers.
But while it is popular with merchants who process less than $200,000 a year, Square has yet to crack the more lucrative higher end of the digital payments market where it faces stiff competition from entrenched and much larger players, Miller said. Another challenge: Square still does not process its own payments, Miller said.
Square is treading where many companies are too nervous to go. The so-called “unicorn” technology companies that private investors have valued at billions of dollars have raised large rounds of capital in the private markets rather than risk the recent volatility in the public markets for tech offerings.
“This is going to be a tough run” for Square, predicted Max Wolff, chief economist at Manhattan Venture Partners. “The IPO window does not look open right now.”
Square which is not profitable is going public “at a moment when investors’ sensitivity to that shortfall is somewhat acute,” Wolff said.
Complicating matters even more for Square is the controversial double duty of its CEO Dorsey. Dorsey will likely face questions about his ability to focus on the IPO process, Wolff said. And Square itself lists the competing demands on its CEO as a risk factor in the filing: “This may at times adversely affect his ability to devote time, attention, and effort to Square.”
Twitter this week said it would jettison up to 336 people — roughly 8% of its workforce — as part of a restructuring that Dorsey says will place the social media company “on a stronger path to grow.”
“I am pretty sure we have never seen someone try to be CEO of a huge company trying to do a turnaround while doing a road show for another company that is going public,” Wolff said.
Square filed to offer up to $275 million in stock, but that amount may be a placeholder used to calculate registration fees.
Follow USA TODAY senior technology reporter Jessica Guynn on Twitter: @jguynn.
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