Square Is Talking To Investors About A New Round At $US5 Billion Valuation -- But What About IPO Plans?

Jack Dorsey’s payments startup Square is talking to investors about raising a new round of financing at a $US5 billion valuation, Jessica Lessin and Eric Newcomer of The Information report.

Lessin and Newcomer say the company would use the money to buy stock from some of its employees.

The news may signal a change in plans for Square.

In November, The Wall Street Journal’s Douglas MacMillan reported that Square was talking with Goldman Sachs and Morgan Stanley about a 2014 IPO.

MacMillan said Square’s 2014 revenues could approach $US1 billion, up from $US550 million this year.

It’s possible that Square could do a final late stage round in the next couple months and an IPO in 2014.

But again, Lessin and Newcomer say the point of the $US5 billion round would be to allow insiders to sell their stock.

Why would insiders want to do that instead of waiting for an IPO?

They wouldn’t — unless they think there’s a chance Square might IPO at a valuation less than $US5 billion.

So what’s going on?

Don’t know! But let’s speculate.

Maybe Dorsey suddenly doesn’t feel like Square is ready for an IPO.

Maybe Dorsey took a look at taking Square public and decided no thanks.

The only reason for a company to go public is to get employees and investors liquidity and to have liquid stock to use for acquisitions.

Otherwise, being public is a big pain. You have to spend a lot of your time kissing-up to big shareholders who control your fate — shareholders who have your number on speed-dial.

This $US5 billion round would take of liquidity for Square. And maybe Dorsey doesn’t feel like Square has any big acquisitions ahead of it. So why go public ever?

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