Cantillon: Square IPO roundly defies nay-sayers

What a difference a year makes. Payments company Square may have been valued at $6 billion in 2014, but when it came to the stock market, things were a little more measured. When Square said it was looking at pricing its shares in the $11 to $13 range, there was consternation at the impact it had on the company's valuation. The final initial public offering (IPO) price of $9 cut another 25 per cent off its capital raising, which sent some industry watchers into a flapping freefall.

In the wake of the news there was all sorts of speculation. Square chief executive (pictured) Jack Dorsey's double-jobbing at Twitter was making some potential investors nervous, some mused. The tech bubble was over and the unicorns – startups worth at least $1 billion – were done, others said. There were comparisons made with Facebook, Twitter, Etsy and other tech-focused startups that had gone down the IPO route.

But it seems erring on the side of caution may have been a good thing for Square. On its first day of trading, Square shares rose 64 per cent before settling back to a 45 per cent gain. Not bad for a firm that only a day earlier had been the subject of doom-laden headlines.

Even though the company’s valuation had been cut to $2.9 billion, previous investors weren’t losing out too much. Those who invested a year ago were guaranteed a 20 per cent return thanks to a “ratchet”, while those who got on board with Square early had paid a significantly lower price for their shares.

It also emerged in recent days that the stock offering had raised a little more capital than previously thought. Square said its IPO underwriters had bought an additional four million shares, increasing the size of the IPO from $243 million to $279 million.

So it’s all looking a little more positive for the company, despite the initial rocky start. Square’s shares may have fallen back a little from the early highs,but they are currently trading well above the $9 stock offering price.

Whether that means other tech firms will be able to tread a similar path is not yet known. But one thing is clear: the unicorn is sticking around for a little longer.