With both Apple and Google looking like strong contenders for an acquisition, mobile payments processing company Square’s eventual exit might just happen via an IPO, Re/Code is reporting. According to several industry observers, Square would immediately give Apple built-in distribution at thousands of businesses, while Google would want more information on purchases that consumers make to better target its ads to individuals.
Last year, Apple and Google both considered making acquisition offers for Square. According to industry sources familiar with the situation however, it’s still unclear if it was more than a typical business development exercise. It is being speculated that an offer in the $8 billion range, which would mark more than a 50% premium over the $5 billion valuation Square secured during a recent secondary offering, would get the company board’s attention. Nonetheless, many experts still believe that the company will instead choose to go public.
“While it seemed at some point like 2014 was potentially the year Square would test the public markets, people familiar with the company’s thinking doubt that’s now the case. One problem the company is facing is that the revenue it makes from payment processing is still the vast majority of sales, while other revenue-generating products have either not yet launched or not yet taken off.
For example, the company slashed the price of its Square Stand tablet holder from $299 to $99 within months of its launch, hinting at either bad pricing estimates or lower than expected demand. Square’s search for diversification has also led it to what some consider a controversial offering: Merchant cash advances.”
So while a Square IPO might seem inevitable, pulling one off in 2014 would likely be tough.