Square To Go Public, Privately

Jack Dorsey has taken the first steps in taking his mobile payments company public, but he’s doing so out of the glare of the typical IPO public spotlight.

Square has filed for an IPO, according to anonymous sources cited by Bloomberg, and those sources indicate that Square is doing so with the help of Goldman Sachs, Morgan Stanley and JPMorgan Chase. Because the confidential IPO process that Square has reportedly started is private, the sources asked Bloomberg not to be identified.

Dorsey has been pretty cagey over the years in providing details about revenue. But the process that Dorsey and Square have initiated to go public are for companies that have less than $1 billion in annual revenues. How much less Square has, we don’t know, but we do know for certain that they don’t hit the $1 billion threshold. But because Square’s revenue is less than $1 billion a year, the SEC, thanks to the JOBS Act, allows Square to file for an IPO without the public being informed of the process. Additionally, the JOBS Act allows companies to explore going public with a veil of secrecy and also allows companies to disclose relatively less financial data than they would if they went through the traditional IPO steps.

Square’s most recent valuation has been around $6 billion, and it has raised hundreds of millions from major investors. This includes $150 million in new venture capital financing that was announced in the fall from investors such as Goldman Sachs, among others. 

That said, 2015 has been a busy year for the payments company that has pushed the pedal down full throttle as a SMB merchant services organization. It most recently launched its Square Dashboard app, which tracks a business’ sales data in real time. Square also recently announced that it was partnering with Apple to distribute its new EMV/NFC dongle that will begin shipping this fall — with 250k of them given away for free to “seed” the market of micro-merchants who want to accept Apple Pay.

Square, which processes roughly $30 billion in payments annually from “millions of small and medium-sized merchants,” has also entered the SMB lending and payroll processing arenas. And, Square Cash, the P2P solution that it launched, is reported to process more than $1 billion worth of transactions a year. One of Square’s biggest challenges is its ability to “cross the chasm” and compete in the merchant services arena with the likes of players such as Vantiv, PayPal, Intuit and First Data — all of whom have robust platforms that are well suited to the needs of SMBs who are growing and needs solutions that scale with their business.

Square’s announcement in May of an additional capital raise came from investors including Colchis Capital and repeat investor Victory Park Capital to help build its Square Capital SMB lending program. Square Capital has provided more than $100 million to than 20,000 business.

The chatter about Square’s IPO plans come at a particularly interesting time for the company’s leader as Dorsey also serves as Twitter’s interim CEO, replacing Dick Costolo. Dorsey’s role, however, has been met with mixed reaction. Dorsey’s leading Twitter — even on an interim basis — had some shareholders concerned about his time availability due to his responsibilities running Square. 

As the IPO rumors gain more validity, it seems to verify that Dorsey will stay with Square and won’t take over as permanent CEO at Twitter. Dorsey has assured that in recent interviews as well. According to a New York Times report, Dorsey owns 26 percent of Square and 3.6 percent of Twitter. 

Forbes also cited unnamed sources in its report in June that said Square would go public in 2015. That move, of course, comes after many rounds of “Will they?” or “Won’t they?” speculation that stretched back to last year when Square denied in the second half of the year that it had delayed an anticipated 2014 timeframe for filing to go public.

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