FIVE years ago the odds of being able to pay with a credit card at a street stall or coffee stand in America were next to zero. Nowadays, though, cash seems slightly déclassé at hipster cafes and fancy farmers’ markets. That is thanks largely to Square, a six-year-old firm which handles credit-card payments for 2m-odd small merchants and listed in New York this week.
A private fundraising last year valued Square at roughly $6 billion. The initial public offering (IPO) priced it at $2.9 billion, down by half. The valuation sent a frisson through Silicon Valley, where there are increasing concerns that the optimistic assumptions about the growth and profitability of many “unicorns”—privately held technology firms valued at over $1 billion—are unfounded. Square, the theory runs, may be the first of a series of “down rounds”, capital-raisings that sharply reduce valuations.
Nonetheless, the IPO still leaves Square more valuable than all but the biggest of America’s banks. That is controversial, since the firm has lost $420m since 2012 and has said it intends to lose more. Sceptics dismiss...Continue reading
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