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back to article Twitter co-founder chats to banks about floating ANOTHER profitless firm

Not content with one high-profile IPO, Jack Dorsey is trying to get his other startup, payments firm Square, onto the market in 2014, according to recent reports. Dorsey, who founded both Square and Twitter, has held discussions with banks about getting the company that lets you make payments with your mobe or fondleslab ready …

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Silver badge
Holmes

Appropriate

Since we appear to be in the realms of not-really-existing currency (See Quantitive Easing, ZIRP, Bank Bailouts, etc., ad nauseam), why am I not surprised at those who choose to chase spurious fortunes valued in Monopoly money, based on buying (part of) an unprofitable enterprise, with money they don't have but which doesn't really exist anyway.

My mind is too confused to boggle...

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Silver badge

STRIKE WHILE THE MONEY MINTING IRON IS HOT!

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Sell and Run

Better keep on running though, there will be lost shirts.

At least Square has a revenue possibility though - twitter won't even be next decades chip wrappers.

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Square, unlike Twitter, has a real product/provides a useful commercial service. On the other hand, they would appear to be quite vulnerable to direct competition from the credit card services on which they depend.

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Re: Competition

Not necessarily. The CC companies are not interested in processing. Nor are banks. In Canada if you want CC processing added to your company bank account, you have to go to an approved third party. This removes liabilities to the processor and seller from the bank and CC companies. They are more than happy to sit back and take a shave while managing the risks related to your ability to pay and prevention of fraud.

I totally agree with your assessment of the usefulness of the service and am considering using them. As an investment, if they do indeed meet the growth goals over the next half year to year, they have a possibility of being a decent investment if the price is right.

Regardless what one may think of twitter (I don't use it and try to avoid it at all costs), the management of the service provided has been pretty good compared to say FB and I bet that Dorsey has used a lot of the things he learned there in the running of Square's operations.

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Re: Competition

In the UK, you do go to your bank if you want a card processing account.

Either way, there is an established mechanism out there to allow customers to pay retailers electronically using some sort of plastic card. Those people have an advantage over everyone else should they want to add the facility to pay using your phone to that.

As someone who sometimes pays using plastic cards, I would trust a bank supplied app for phone based payments more than I would trust some tech startup I've never heard of.

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Re: Competition

>In the UK, you do go to your bank if you want a card processing account.

This is true in Canada too, but they send you to a company like Moneris that does the processing. It is kind of weird right now because every bank and phone company is launching their own system right now for phone based payments and Moneris the big CC and debit card processor is putting out a device that does CC and debit (encrypted Bluetooth to tablet or smartphone).

>Those people have an advantage over everyone else should they want to add the facility to pay using your phone to that.

There is no doubt about that being true, however, the bank or CC company also has a bigger liability issue when it acts on both sides of a transaction, and given the fact in the article about the CC companies taking 80% of the processing fee, I don't see how it is in their interest to take the additional risk on the other 20%. Let the small fry take care of this. Much like how mainstream processors will not do business with 'adult' sites due to charge-backs, so there is a whole industry of processors from just below mainstream standards to too dodgy for even organized crime to use.

>As someone who sometimes pays using plastic cards, I would trust a bank supplied app for phone based payments more than I would trust some tech startup I've never heard of.

If you haven't heard of Square, I assume you are not in North America, because here it is the darling of small business or independent 'techy' types as there is less hassle than the PayPal card reader and no monthly fees like the bank/third party system. It is a company doing $20 billion in processing a year, hardly a fly by night company.

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Anonymous Coward

And people wonder why financial markets collapse when companies who can't turn a profit are valued at 24 billion.

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If a company is making a profit and priced at say a P/E of 10 (very conservative) in a mature field and then due to a market or technological shock can no longer earn a profit and it incurs losses such that liquidation of assets does not yield much on the dollar, then that is no better a risk for an investor to have taken.

For the company to be valued at that rate is absurd from the perspective of requiring $750 million USD profit to be in the same valuation range as Google.

As for financial markets, individuals taking risks is what keeps markets healthy, and a decent profit today and the past means nothing in the future, and all a company is worth is the present value of its future profits. Select your own rate of discount and risk multiplier because there is no way to actually predict the future, though many will tell you otherwise.

Much of the collapse was attributable to poor lending practices, both by financial institutions and governments. The government kept rates low to encourage growth when the economy was already doing all right. A consequence of this was that financial companies were lending money to people who could not afford to pay their mortgage when interest was calculated in, they could barely make the no-interest or below market interest rates that the loan calculation was based on. This massively inflated housing prices (and many other things as well) leading people to believe that their assets were larger than actual. People then borrowed against their inflated house values not understanding much like a company, a house is a risk with potential liabilities possibly exceeding the realizable value. And besides, everyone else was doing it.

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Actually the price is that. The value is up to you to decide as an investor and the future will tell the rest of us what it is worth. If you think that it is high, once shorting is allowed, you can place your bet there. In fact, you should hope it rises even more till you do decide to short.

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