Square Inc. raised about a third less than it sought in its initial public offering as investors balked at a higher valuation for the mobile-payments service.
Square and an existing shareholder raised $243 million, selling 27 million shares for $9 each, according to a statement distributed by Marketwired on Thursday, after offering them for $11 to $13 apiece. But the price was low enough to entice skeptics as well as bulls who are confident in its growth prospects — by midday, Square's share price rose more than 60 percent.
The initial pricing not only fell short of the proposed range, but also of the $15.46 a share Square sold stock for in its last private funding round. The IPO price puts the company's market valuation at about $2.9 billion, excluding options. The company fetched a $6 billion valuation in its latest financing.
Square's IPO highlights a conundrum: whether it should be valued as a traditional payments company or one of its technology peers. Square got its start by creating small devices that plug into smartphones and tablets to allow merchants to process payments made by cards, from which the company usually takes a 2.75 percent cut per swipe.
"It seems more like another payment processor that uses a little technology than a technology company," said Erik Gordon, a professor at the University of Michigan's Ross School of Business. "There is no way to put a smiley face on a price that is 40 percent below its previous valuation and nearly 20 percent below the low end of its projected offering range."
Match Group Inc., the online-dating platform whose services include Tinder and OKCupid, also raised less than it wanted in an IPO Wednesday. Match and Square are coming to the markets at a volatile time for offerings. Last week, fast-growing online mortgage lender LoanDepot Inc. canceled its IPO and Fitbit Inc., the wearable device maker, reduced the size of a planned secondary offering.
Match, a unit of billionaire Barry Diller's IAC/InterActiveCorp, sold 33.3 million shares for $12 each, according to a statement, after offering them for $12 to $14.
Based on the IPO price, the company has a market value of about $2.9 billion. Match's IPO will give public investors a way to bet on the online-dating behemoth, instead of indirectly holding a stake through parent company IAC.
Match said in a separate filing Wednesday that an interview with Sean Rad, the chief executive officer of its Tinder app, published that day in the U.K.'s Evening Standard newspaper "was not approved or condoned" by the company. Rad isn't a director of Match and wasn't authorized to make statements on behalf of the company, and figures included in the article on Tinder's user base and the number of daily "swipes" were "inaccurate," according to the filing.
The article, in which 29-year-old Rad says he's "addicted" to the Tinder service and falls in love with a new girl "every other week," follows other ill-timed interviews during the initial public offerings of technology giants.
In 2011, daily-deal site Groupon Inc. asked investors to disregard comments made by Chairman Eric Lefkofsky, who told Bloomberg the company was "going to be wildly profitable." Google Inc. said during its 2004 first-time share sale the U.S. securities regulator was investigating whether it violated rules on information disclosure, after founders Sergey Brin and Larry Page granted an interview to Playboy magazine.
IAC will remain the largest shareholder in Match Group, owning about 86 percent of the company after the IPO, filings show. Proceeds from the offering will go toward repaying debt owed to IAC.
Square plans to use proceeds from the IPO for general corporate purposes and possibly for acquisitions, company filings show. Square planned to sell 25.6 million shares in the offering, while existing stockholder Start Small Foundation, a donor-advised charitable fund created by Chief Executive Officer Jack Dorsey, planned to sell 1.35 million.
The San Francisco-based company's net loss widened to $131.5 million in the nine months through September, from $117 million in the year-earlier period. Net revenue jumped 49 percent to $892.8 million.