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The Square stock price today (Thursday) closed its first day of trading at $13.07 as investors rushed into one of the most anticipated tech IPOs of 2015.
Last night, the Square IPO priced at $9, below the $11 to $13 range. That means early investors saw an initial gain of 24.4% when Square Inc. (NYSE: SQ) stock opened at $11.20 this morning. Based on the opening price, Square commands a market cap of about $1.9 billion.
The company sold 27 million shares and raised $243 million.
Today's two tech deals - the Square IPO and Match.com IPO - should help revive the sluggish IPO market. Only one tech company went public in the third quarter - down 86% from the third quarter of 2014.
The Square stock price skyrocketed 45.2%. That smashed the average first-day gain of 14% for 2015 IPOs.
But there's one factor that will influence the Square stock price down the road...
The Biggest Influence on the Square Stock Price (NYSE: SQ) Now
The one factor that will determine the future of Square stock is the company's lack of profitability.
During the first half of 2015, Square earned $560.6 million in revenue, up 51% from the same period in 2014. A large chunk of Square's revenue comes from its partnership with Starbucks Corp. (Nasdaq: SBUX). Back in 2013, all U.S. Starbucks locations started selling Square Readers and accepting payments from the Square Wallet payment app.
However, Square has actually lost $71 million since the partnership began. Starbucks has ended up accounting for 21% of Square's transaction costs.
The Starbucks partnership is only part of the picture. Square reported a total loss of $154.1 million in 2014, $104.5 million in 2013, and $85.2 million in 2012. So not only is the company losing money, its losses are widening.
The company openly admitted in its IPO filing that it may never achieve profitability.
"Our business has generated net losses, and we intend to continue to invest substantially in our business," the filing said. "Thus, we may not achieve or maintain profitability."
Although the company will likely see big gains today, we recommend not investing in Square stock. That's because investing in newly public companies can cause huge losses for traders who aren't big-time investment bankers.
For investors looking to buy SQ after the IPO period, we've developed this safe three-step strategy for investing in Square stock...
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