As Square’s Profitability Shrinks, So Do Its Options
Facing shrinking cash reserves and increasing losses, Square could be being pushed by market forces into a sale with a deeper pocketed mWallet player.
Square took a loss of about $100 million in 2013, an increase over 2012’s loss. Additionally, the five-year-old company paid roughly $110 million more in cash last year than it took in. Over the last three years, Square has gone through about half of $340 million it raised in four rounds of equity financing since 2009.
As PYMNTS has previously reported, Square has been linked to many high profile Silicon Valley players as a potentially valuable asset, particularly among competitors in the race to become the world’s dominant mobile wallet. The five-year-old startup’s Square shaped mobile reader essentially renders mobile phones and tablets into POS, as well as offering relatively inexpensive credit card processing services.
Square has received a lot of attention from investors and media figures, and the design-oriented company is informally valued in billions by analysts. However, Square’s profit margins are razor thin in it largest area, which is payments processing.
Square has been considering diversifying its option by offering more services layered on the payments system. Google remains the most speculated about potential partner for Square,since the companies real-world tie compliments Google’s effort at launching its mWallet.
However, Square denies acquisition rumors, particularly about Google.
“We are not, nor have we ever been in acquisition talks with Google,” said an unnamed insider, reports the Wall Street Journal.
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