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Editor's Note: We will be providing coverage of the Square IPO through the stock's first day of trading. Check back for updates.
The Square IPO will price this Wednesday, Nov. 18. The deal is one of the most anticipated tech IPOs of the year. The company has also announced it will list on the New York Stock Exchange with the ticker "SQ." Square plans to raise up to $351 million by selling 27 million shares for $11 to $13 each.
With the company hitting the market this week, investors are wondering if investing in Square stock is a smart decision.
After the pricing, the Square IPO valuation will be roughly $4.2 billion. Square Inc. (NYSE: SQ) stock starts trading on Thursday.
Part of the reason for the huge valuation is its rapidly growing industry. The mobile payment industry is expected to reach $142 billion in volume by 2019, according to a report from research firm Forrester. And now, many investors view SQ stock as a long-term investment.
But for those looking to buy Square stock, these are the two biggest factors that will affect the Square share price after the IPO…
Square Inc. (NYSE: SQ) Isn't Profitable
Some investors believe Square's innovative payment technology makes SQ stock a good investment. Others view CEO Jack Dorsey's dual leadership of both Square and Twitter Inc. (NYSE:TWTR) as a hindrance to future profitability.
In fact, the company openly admitted it may never turn a profit. It posted $154.1 million in net losses in 2014 and $77.6 million during the first half of 2015.
"Our business has generated net losses, and we intend to continue to invest substantially in our business," the Square IPO filing said. "Thus, we may not achieve or maintain profitability."
Jack Dorsey: CEO of Square (NYSE: SQ) and Twitter
The Square IPO filing was very upfront about the challenges facing the company.
Square acknowledged that Jack Dorsey's dual roles at Square and Twitter Inc. (NYSE: TWTR) could cause conflict. "This may at times adversely affect [Dorsey's] ability to devote time, attention, and effort to Square," the Square IPO filing stated.
You see, Dorsey took over as CEO of Twitter on Oct. 2 during a pivotal and turbulent time. Twitter suffers from slowing user growth and stiff competition for advertisers' money from rivals like Facebook Inc. (Nasdaq: FB).
If Twitter was as strong as Facebook in terms of user growth and revenue generation, there would be less worry about Dorsey handling both roles effectively. Since he has to completely turn Twitter around, however, that's where the conflict arises.
So how is an unprofitable company like Square valued at $4.2 billion? It's because the company is fueled by speculation…