In December, The Information reported that payments company Square was considering funding a secondary tender offer for employee shares at a $5 billion valuation. We’re hearing from sources close to the transaction that Square has initiated this tender offer, at a $5 billion valuation (up from $3.25 billion at the company’s last round of funding).
According to our sources, existing investors SV Angel and Rizvi Traverse Management are buying shares from shareholders as well as new investor Groupe Artemis, a French holding company owned by luxury goods mogul François-Henri Pinault. The offer is being facilitated on Second Market, we hear. In this particular offering, existing, vested shareholders, including employees, are able to sell a portion of their vested stock.
As more tech companies wait longer to go public, it’s not uncommon for these secondary offerings to take place to give early employees some liquidity prior to a public offering and potentially buy back stock. In this case, existing investors bought more stock, and this round allowed a new investor to participate. Having a French luxury goods mogul close to the company, especially Pinault who owns Gucci, Stella McCartney, Alexander McQueen and Yves Saint Laurent, is probably a good thing for Square, which is providing payments technology for the offline world.
Rumors have been swirling that Square is talking to banks about a potential IPO, but we hear this is still a way off and the company could likely raise another round before going public.
As The Information reported, Evernote, SurveyMonkey and others have allowed employees to sell shares either back to the company or to other investors. Facebook and Groupon also allowed employees to sell shares in certain rounds.
Square founder and CEO Jack Dorsey also just returned 10 percent of his shares in the company, which could be used for additional equity for new employees or for acquisitions.
In terms of the valuation for the round, Square saw payment volume of $20 billion in 2013, and is expecting $30 billion this year, according to WSJ. However, the company’s net from that is expected to go from $550 million to $1 billion. So with 50 percent more volume, Square is doubling its take, which implies better margins and could be a reason for the jump in valuation to $5 billion.