Mobile Commerce

Andreessen Refutes Tech Bubble Theory

Shortly after payments company Square announced late last week that the price of its initial public offering shares would be lower than market expectations, venture capitalist Marc Andreessen, who is not an investor in Square, took to Twitter to discuss what the company’s upcoming IPO means for the tech industry.

Square filed paperwork last week with the Securities and Exchange Commission that laid out plans to sell 27 million shares at a price between $11 and $13 per share, seeking a valuation of as much as $4.2 billion through its IPO. That’s a far cry from the $6 billion that had been batted around when the company went through its most recent funding round.

As Fortune reported, not only did the pricing suggest a lower than expected valuation, it also caused many to question if the tech bubble is finally about to burst.

However, in a series of tweets, Andreessen offered up a different view.

According to Andreessen, for the tech bubble to actually exist, an irrational amount of exuberance must be extended to the equity markets where the value of tech companies lies, and Square presenting modest price expectations proves that it hasn’t.

 

 

Fortune noted that while Square’s backers may have jumped the gun on Wall Street when it comes to pricing, the potential valuation of the company is still expected to be higher than previous private rounds.

That amount typically will change once true activity to go public takes place.

But a real pricing range will come as Jack Dorsey, the company’s chief executive officer, and other executives gauge interest from potential investors via what is known on Wall Street as a “roadshow.”

CNBC said the IPO roadshow for Square could begin as early as this week.

In the meantime, reported Reuters, Rapid Ratings, a service that assigns scores and ratings to the relative strength of the financials put up by companies, assigned Square a 41 out of 100.

The 100 rating, said the newswire, is a score given to the “most fiscally sound” companies. Square’s rating falls into the “medium risk” designation, due to a sliding operating earnings profile and a debt load of more than $350 million.

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