Square has vastly underperformed during its Initial Public Offering (IPO). According to the latest statistics, Square is now valued at $3 billion and failed to achieve its target of between $11 and $13 per share. Instead, it was forced down to an incredible $9 per share.
For Jack Dorsey, the former executive from Twitter, this is terrible news. Square was one of the most highly anticipated companies to opt for an IPO. It was one of the leading unicorn companies and this could very well indicate troubled waters ahead for the company.
This article is going to examine Square's future and whether its status as a 'unicorn' has gone against it.
A Leading Unicorn Company
Unicorn companies are companies that have gained estimates of over a billion dollars while they are still in the startup phase. The only companies to have achieved this status are in the technology sector. Square is one of these unicorns.
Like many other companies, they are given these huge valuations before getting their revenue streams up and running. Many people criticize the idea of unicorn companies, saying that it puts undue pressure on startups and leads to valuations that do not reflect reality.
In Square's case, this may or may not become a problem.
Is a Disappointing IPO Something to Fear?
There has been something of a trend in recent years where technology companies that go public never meet their expectations. The same happened with both Facebook and Twitter. In both cases, the companies have continued on, and even thrived, especially in the case of Facebook.
A disappointing IPO on its own is not something to fear. It is a commonplace for market hype to lead to over-optimistic predictions. Jack Dorsey, due to his background, garnered a lot of publicity for Square, and that could just as well have contributed to inflated predictions.
However, Square is different from others such as, Facebook and Twitter.
The Timing of an IPO
Square Inc. is in the financial services industry. Unlike many unicorn companies, this provider of merchant accounts has managed to start up its business and generate some income long before they decided upon an IPO.
The desire from Square was to scale a small but reasonably successful company in order to reach a larger audience. However, Square is far from a Facebook or a Twitter. In both cases, a failed IPO wouldn't impact the company's user base or the way they operated because they were already huge entities.
Square is in an important growth period. The fall of the stock price so early is a major problem for a company still trying to find its place in the world.
Other Problems on the Horizon
It's easy to dismiss the stock price as the realm of traders and investors. But in Square's case, the problems continue to stand, and they are coming from ordinary people. The way Square has been running its business has caused many people to criticize them.
Most tellingly of all is rampant disappointment from their target audience. According to statistics from Vision Payments, negative customer reviews have been growing about how Square has been running its business.
In the financial services industry, customer trust is the foundation of any company operating in this niche. If Square is struggling to maintain trust at this early stage, the future is bleak.
In an already competitive industry, Square cannot afford to have problems relating to trust. The general public is notoriously erratic in financial services. They will look at competitors if there's even the hint that their money isn't safe and easily accessible.
What Does the Future Hold?
The future of Square isn't yet clear. As it stands, this is a company in a deep rut. Jack Dorsey has to contend with problems with investors who feel crushed by the failure of the IPO and the general public. There are problems with the product and those issues must be resolved as soon as possible.
The longer this lack of trust remains the less likely the company will be to have a long and successful future.
There are no guarantees that Square is going to fold. It still has a huge amount of financial capital in which to turn its situation around. How it uses this money will determine the future of Jack Dorsey and his business. But the clock is already ticking and the longer these problems are allowed to persist the less likely Square is to emerge from them.
What are your opinions on the recent events surrounding Square?