The company is about to go public with its IPO, but there are some big questions facing it.
Square is wooing investors ahead of its initial public offering, but some have some major concerns about the popular payment service.
The company is seeing slowing revenue growth and growing losses due to fraud, and that’s not small issue for a company hoping to strike it big when it unveils its IPO, according to a Forbes.com report.
And it’s not just that. CEO Jack Dorsey is also chief executive of Twitter, and investors are concerned about how exactly he’s going to split the time between the two jobs. With the concerns facing Square, they may need all of his attention.
Square disclosed some of its financial figures in its IPO registration documents, and the line item for operating expenses keeps going up year after year. That’s somewhat expected as more payments go through the service, but the high rate is concerning and indicates lots of fraudulent charges this year. The fact that transaction losses as a percentage of payment volume decreased between 2012 and 2014 but suddenly jumped in the first nine months of this year is indicative of that.
Square processes a lot of money: more than $25.4 billion through September this year. Of that total, it had a transaction loss rate of 0.16 percent, which may not sound like a lot but is the highest total since 2012, and a lot higher than the 0.10 percent it was seeing over the same time period last year.
And that’s a big deal, because Square only makes a small fraction of the money off each transaction, so any dent in that is huge.
That means that those fraud losses could account for millions of dollars in lost profits. That’s definitely not a good thing to deal with going into an IPO.