A Square Pop, And A Drop

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Square’s IPO came in hot, bouncing more than 40 percent in its first day of trading. Priced conservatively, the offering did what all IPOs must do to set a positive narrative: rise.

In the ensuing days of trading, Square has slipped. Today, as TechCrunch reported, shares in Square fell for the third consecutive session. A good first day, it seems, does not a good first week make.

The pattern: Price, pop, and then decline is now a familiar dance. This is important to stress; TechCrunch is not trying to point an unfair finger at Square. The company does exist, however, inside of a cadre of companies that have followed a similar pattern.

The data speaks for itself. For example, here’s a chart of Etsy since its IPO:

Screen Shot 2015-11-24 at 12.05.30 PM

Box has had a rough time of it:

Screen Shot 2015-11-24 at 12.06.17 PM

And don’t forget GoPro:

Screen Shot 2015-11-24 at 12.06.49 PM

Oh, and Castlight Health:

Screen Shot 2015-11-24 at 12.07.32 PM

Alibaba:

Screen Shot 2015-11-24 at 1.01.30 PM

Apigee!

Screen Shot 2015-11-24 at 12.20.57 PM

As with everything, counter-examples exist. Zendesk, GoDaddy, Arista Networks and PayPal have largely held up. It is reasonable to argue, however, that the moderate IPO pace we have seen in 2015 is not entirely surprising given the performance of many offerings.

Tie that into the rising trend of kneecapped private valuations and you almost have a trend.

It’s still early days for Square and it’s tough to know what will happen with the stock price or the company’s value. Square went boom on its first day of trading, climbing to $13 per share. But the card reader company took a valuation nose dive, cutting its previous $6 billion paper worth in half up front. The current value sits at roughly $3.88 billion.

Square probably low-balled the IPO stock price to focus on a larger pop and create positive investor sentiment. 

What sort of omen is this for Silicon Valley? Who knows, but as we see here, a pop is not a lock.