Recent Buy – SQ

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:

1. No dividends paid
2. They lose money
3. They lose even more money with volume (Starbucks)
4. They had to cut the IPO price
5. Their losses attributable to fraud is greater than the average
6. They’re holding a high number of shares in treasury
7. 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.

1. Passionate customers – the merchants I’ve talked with all deliver rave reviews
2. The fraud issues are fixable
3. 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.