This is what it sounds like when unicorns cry.
Square, the mobile payments processing firm run by Twitter CEO Jack Dorsey, priced its initial public offering Wednesday night at $9 a share — well below its expected range of $11 to $13.
Shares will begin trading on the New York Stock Exchange later Thursday morning.
There’s no sugarcoating this. Square failed to excite the managers of big mutual funds and hedge funds, the so-called smart money on Wall Street.
And that could be a bad sign for other unicorn startups looking to one day go public — billion dollar startups like Airbnb, Dropbox, Pinterest, Snapchat and Uber.
Square’s stock sale values the company at $2.9 billion. Last year, Square raised money from venture capitalists at a value of $6 billion.
Why is there such a discrepancy between the prices that Silicon Valley and Wall Street are willing to pay for Square?
For one, Square’s IPO comes at a tough time for newish tech companies in general.
Other recent tech IPOs — such as Box, Alibaba, GoPro and Fitbit — have all tanked following flashy debuts.
And shares of another unicorn, Pure Storage, have barely budged since going public last month.
That’s because Wall Street tends to be more short-term focused and less forgiving of a company’s shortcomings than VCs who can afford to take a longer-term view.
Square, like many other unicorns, is not profitable. That’s strike one.
Investors also seem concerned about tough competition from rivals First Data and PayPal as well as the threat from the likes of Apple, Google and Facebook in the mobile payments market. Strike two.
And then there’s the Dorsey factor. He has to convince investors that he will be able to effectively run both Square and the struggling Twitter. Strike three! You’re out!
Of course, Square could turn things around and become a Wall Street stud.
Facebook’s IPO wasn’t the smoothest of debuts. And look at it now.
But Facebook was profitable when it went public in 2012. Square still has much to prove.
It will take more than a celebrity board of directors (Mary Meeker, Larry Summers, former Brown University president Ruth Simmons and NBA legend Magic Johnson to name a few) to convince Wall Street that Square is worth buying.
Unfortunately for its investors, Square looks more like the current Los Angeles Lakers than Magic’s Showtime teams from the 80s.