Sometimes, the “I told you so,” moments just take too long to happen.
They do, eventually, but by then, either people don’t remember, or they aren’t around any longer.
I still remember people refusing to sell the Qwest stock in their 401k in order to diversify because it was, “the best investment I have,” and then seeing the stomach churning drop that must have wiped out 50 percent or more of their retirement money.
Then, of course, were all the people sitting smugly across from me saying that “real estate never really goes down,” as they talked about pooling money with family to buy a house in Phoenix.
Square Not Worth $6 Billion in IPO?
For years, people have been saying that the venture capital market and the various valuations given to technology companies before they go public are maybe a bit unrealistic.
Of course, something always seems to come along and save the two Simpson children, as they say.
These are IPO winners and losers for 2019
(Well… as I say, anyway.)
Tumblr was reportedly running out of money fast, but Yahoo swooped in and paid them a billion dollars anyway. Instagram got a billion from Facebook. And, so on.
Today, maybe, indicates the first I told you so moment for the tech industry.
Square, a mobile payments company founded, and still run, by Twitter co-founder Jack Dorsey, last raised money from private investors and venture capitalists at a valuation of $6 billion. But, as the company gets ready to launch the Square IPO, it’s looking to price itself at between $11 and $13 per share, which is a lot closer to $4 billion.
What does this mean?
Maybe not as much as you think.
Square generates lots of money, but doesn’t come anywhere close to generating a profit. That flies in the world of venture capital where having 99 losers and 1 big winner makes you a successful investor, but out in the public stock markets where losing money, is losing money, things get a little different value.
If the company waited to get profitable, then it’s valuation might be a lot higher.
Then, again, if the markets weren’t feeling pretty good, especially for tech companies, lately, chances are they couldn’t even go public in this financial condition.
For the average investor none of this matters considering only a very small group of companies can even be invested in pre-public Silicon Valley tech companies, but the overall economy depends a fair amount right now on the jobs and money being generated by all of those “maybe someday” startups.
If investors take enough notice, then they might not be so eager to keep sloshing money around in the venture capital funds.
And if that happens, then it actually will matter to investors in tech, and beyond.
Filed Under: InvestingTagged With: Investing, investments, Stock Analysis, Stocks