Square, Inc. stock popped when its mobile payment service crushed fourth-quarter sales expectations on March 9 — but then plunged as the company racked up a bigger-than-expected losses.
Square and troubled Twitter have the same CEO, Jack Dorsey, and both have spent the vast majority of their public market experience below the price of their first day of trading.
Breitbart News has extensively documented Obama bundler Chris Sacca’s Board of Directors’ coup last summer that fired popular Twitter CEO Dick Costolo and brought back founder Dorsey. With the company throttling commentary from conservative celebrities like Breitbart Tech editor Milo Yiannopoulos — who has 120,000 Twitter followers — Twitter has tanked from the #3 worldwide social media darling to #9.
Square posted quarterly revenue of $374 million from October to December 2015. That was up 49 percent from the same time in 2014, and about 10 percent above the $343 million average revenue prediction by Wall Street analysts, according to Thomson Reuters.
Square CEO Jack Dorsey, in an after-trading call to investors, trumpeted, “We’re off to a great start with fourth-quarter financial results that demonstrate both high growth and strong operating performance.” He added that the company had completed more than $10.2 billion in transactions for the quarter.
But despite a great revenue boost in its strongest seasonal quarter, the company lost $80.5 million, or 34 cents a share for the quarter. That was more than double the $37.1 million loss from a year ago.
A big reason for the stunningly large loss was what the company calls “certain one-time expenses.” That is financial gobbledygook for Square guaranteeing its venture capital investors that they would make a 20 percent profit when the company went public, no matter what early stage investors paid for private shares before the initial public offering.
Referred to in Silicon Valley as a “ratchet” feature, Square Inc. VC investors that paid $15.46 a share for Square private stock in 2014 received an option against a future “down-round” of funding.
When Square went public in November at $9 a share, VC investors faced a 29 percent loss. But through the magic of a “ratchet” guarantee, Square Inc. issued each VC shareholder a free extra 1.15 shares of Square. Just like a magician saying “presto,” the VC investors’ 29 percent loss became a 20 percent profit.
T real loser in this “Tails-I-win-and-heads-you-lose” alchemy is the public that bought stock that popped up 45 percent to $13.07 on the November first day of trading after the initial public offering (IPO).
Massive dilution from free “ratchet” shares diluted the holdings of unsuspecting public buyers and Square’s stock price crashed down to the $8 range. The shares are still only trading at $11.44 a share after the better-than-expected sales revenue report.
Jack Dorsey has said he is confident that he can juggle the CEO duties for the two companies, adding that Square and Twitter are just across the street from each other in San Francisco. But both Square and Twitter public shareholders do not seem to be enjoying juggling all the bad news.