What investors are willing to pay for mobile-payments service Square Inc. in its initial public offering will hinge on how much of a technology premium the company warrants for being a member of the startup “unicorn” club.
Two unicorns that went to the markets before Square haven’t fared well in the past months. LendingClub, which went public almost a year ago, surged 56 percent in its debut on Dec. 11. Since then, the stock has plummeted 45 percent. Etsy is trading 45 percent below its April IPO price.
Some of the luster of simply being a tech company has worn off because investors increasingly want to see growing profitability — not just increasing sales, said Rett Wallace, chief executive officer at Triton Research, which analyzes Silicon Valley companies preparing an IPO.
“You could go do a search and replace the word tech with magic,” Wallace said. “How that magic turns into value is kind of unclear.”
