On Friday I decided to initiate a small position in Square, Inc., the day after their IPO. Let’s identify the reasons why this is probably a poor decision:
- No dividends paid
- They lose money
- They lose even more money with volume (Starbucks)
- They had to cut the IPO price
- Their losses attributable to fraud is greater than the average
- They’re holding a high number of shares in treasury
- Next up: Lockup Expiration
Now if that isn’t enough to keep investors on the sidelines – especially DGI investors – then let me explain why I’m willing to gamble a little.
- Passionate customers – the merchants I’ve talked with all deliver rave reviews
- The fraud issues are fixable
- Extension of their product line.
Unlike First Data, IPO’d by KKR, SQ cut their price to levels lower than their final funding round, which improves the odds for me. I like the space – and at a lower price I’d like First Data too.
Most important if they’re able to gain traction and move a little towards profitability, I see them on the radar for a larger player to scoop up.