Square Has Lost 52% Of Value In Past Year

• Shares of Square SQ started trading on Thursday at $9 per share.
• CLSA’s Tom McCrohan said that the IPO valuation is 52 percent below Square’s private equity valuation from fall 2014.

Square’s share price of $9 was below the previously announced range of $11-$13 per share. The IPO price values the company at $2.9 billion, which is short of the previously implied value of $3.5-$4.2 billion.

The IPO valuation is 52 percent lower than the $6 billion valuation ascribed to Square’s venture during the company’s $150 million fundraising round in October 2014, analyst Tom McCrohan mentioned. He added, however, that the IPO valuation places Square’s multiples higher than more established merchant acquiring peers.

For the nine months ended September 2015, the company’s gross revenues stood at $892.8 million, representing 49 percent year-over-year growth. Gross Payment Volume was $25.5 billion, or 51.6 percent year-over-year growth. Net revenues of $412.8 million were recorded, representing 47 percent year-over-year growth.

Net income was -$131.5 million, marking a year-over-year decline from -$117.0 million. Adjusted EBITDA came in at -$35.0 million, a year-over-year improvement over -$57.0 million.

“The number of micro-merchants in the US today is estimated to be about 10 million based on analysis by First Annapolis. Of these 10 million merchants, 83% generate annual sales under $50,000 a year. By comparison, the base of card-accepting merchants in the US totals 8 million merchants, which increases by about 250,000 each year (source: First Annapolis),” McCrohan wrote.

He added, “In effect, extending card acceptance via mobile-phone based card readers doubles the addressable market (in terms of number of merchants, not dollar volume).”