Square co-founder and CEO Jack Dorsey.
Photograph by Jin Lee — Bloomberg via Getty Images
By Dan Primack
October 27, 2015

I’m predisposed to story lines, and already had one worked out for the Square IPO. It began with Jack Dorsey being named permanent CEO of Twitter, followed by Square’s IPO filing (with better numbers than expected, particularly a whopping 110% rate of transaction revenue retention), followed by Twitter raising Q3 guidance and then (I assumed) Square disclosing increased growth in its Q3 numbers (the first period in which Dorsey ran both companies). It all played out right, until that last part.

Square yesterday disclosed its Q3 financials, which included a $53.9 million net loss on $332.2 million in revenue. Those figures represent slower revenue growth and faster loss growth than in the year-earlier period. Not the sort of top-line figures you want to bring on a road show, given that some investors are sure to be skeptical about backing a part-time CEO (particularly in light of broader VC-backed tech IPO difficulties of late). Even if everyone knows to look for Q4, when Square-based merchants are at their busiest, it’s hard to ignore year-over-year Q3.

To be sure, there are some mitigating factors. First, the company added 111 net employees in Q3, including some upper-level hires. Second, in Q3 it lengthened the period during which departing employees can exercise stock options to one year post-IPO. And I’m sure that Dorsey will argue that the backslide was based on an intentional strategy of investing in product R&D rather than slowing down for the sake of Wall Street. Plus, its financials continue to be strangled by that awful Starbucks partnership (that gets closer to ending with each passing day).

Moreover, Square doesn’t technically need money. It had $174 million on hand at the end of Q3, not including the issuance of $30 million in new Series E stock just last week (at the same terms as its earlier Series E raise from late last year and earlier this year, which came at around a $6 billion valuation). At its most recent burn rate, it technically could have lasted through the middle of 2017 without either public or private funds. The only trouble with that, of course, is that this is a company whose board includes folks like Larry Summers (but no longer Vinod Khosla), and Square seems uninterested in waiting to see what global market tumult might arrive next year.

So there are indeed ways to spin the story. But the original arc would have been the straightest line, and the simplest.

Square declined comment on its Q3 figures, citing regulatory restrictions.

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