Signs of confusion in the technology world are everywhere. Private investors are investing in public companies that are down on their luck. Public investors are investing in what by all rights should still be private companies.
What to make of it all?
The news of the day is Square, the payment-processing company that raised $243 million in an initial public offering Wednesday night. At $9 per share, valuing the company at around $2.9 billion, Square conducted its IPO at half the value of its last private funding round and also below the financing it did before that. It is at once a humbling outcome for a former investor darling and an impressive achievement for a fledgling company that loses money and is still tweaking its business model.
That Square’s profile is more a private company than a public one isn’t all that remarkable. In the dot-com era and before it, companies went public well before they were “real” businesses. Some thrived, and more flopped. Capital markets are efficient that way.
It would seem that public investors—so far the big mutual funds that buy IPOs at their offering prices—are getting a bargain given Square’s recent valuations. More interesting are the private investors stepping into companies in which public investors have lost hope. A unit of the private-equity firm Silver Lake said Wednesday it will invest $100 million to buy debt in Solar City, the solar panel leasing company whose shares have been pounded of late. These types of deals are called PIPEs, private investments in public equity. (Silver Lake profits if its debt converts into equity at a higher price than Solar City trades today.)
PIPEs only work if the public market is missing something. That’s why Blackstone is investing in NCR, whose stock also has dropped as a result of competition from the likes of, wait for it, Square. Unlike Silver Lake with Solar City, Blackstone gets a dividend in NCR, so it’s not solely dependent on the point-of-sale equipment maker’s stock rising. Either way it is betting it can help NCR in a way existing investors didn’t envision.
The economy is strong, the world is jittery, Silicon Valley is nervous—and money-making (and losing) opportunities abound. The times are confusing, but exciting too.
Adam Lashinsky
@adamlashinsky
adam_lashinsky@fortune.com
BITS AND BYTES
Square IPO underwhelms. Twitter CEO Jack Dorsey's payment startup has priced its initial public offering at $9 per share, implying a market valuation of $2.9 billion. The company, which will trade on the New York Stock Exchange under the ticker "SQ," had expected to price the shares between $11 and $13. It's last private market valuation was $6 billion. (Fortune)
Match Group files "oops" with SEC. Sean Rad, CEO of Tinder, gave an outrageous interview to the Evening Standard, a London-based newspaper, ahead of his parent company's initial public offering. “The article was not approved or condoned by, and the content of the article was not reviewed by, the Company or any of its affiliates,” the online dating empire Match Group said in a last minute SEC filing. Rad had misused the word "sodomy" and cited incorrect statistics about its user base's activity. (Fortune)
Pfizer seeks tax "inversion." The drug giant is in talks to acquire Allergan, maker of Botox, in a deal that would value the company at $150 billion. As part of the deal, Pfizer would relocate to Dublin, Ireland, where the corporate tax rate is much less severe than in the U.S. The Treasury wants to stop the move by cutting tax benefits for companies that invert. (Reuters, Fortune)
Telegram blocks ISIS channels. The privacy-touting communications startup shuttered 78 public channels on its chat app related to the self-declared Islamic State. The extremist group had previously praised the messenger as "safe." “We were disturbed to learn that Telegram’s public channels were being used by ISIS to spread their propaganda,” the firm said. (Wall Street Journal)
T-Mobile CEO trashes Sprint. John Legere, CEO of T-Mobile, ranted on Twitter that rival telecom company Sprint's latest promotion—intended to steal away Verizon, AT&T, and, yes, T-Mobile customers—is a raw deal. He noted that Sprint plans to slough off $2 billion in expenses next year, mostly through job cuts. Sprint CEO Marcelo Claure shot back: "Only thing going up at @TMobile are prices,what's going down its your quality of service Binge on? More like #cringeon." (Fortune)
Salesforce stock soars after hours. Shares for the cloud software provider rose $4.53, or more than 5%, after the company reported quarterly earnings that beat expectations on Wednesday. The firm brought in $1.7 billion in revenue and posted earnings per share of 21 cents, beating analyst expectations by two cents. Marc Benioff, Salesforce CEO, said that deals with Intel, GE, and AECOM, were important during the quarter. (Recode)
LG developing mobile payment service. The Korean phone-maker posted on its Facebook page that it plans to launch "LG Pay," while declining to reveal more details. The company is partnering with South Korean banks to debut the service in its home country first. No word yet on the prospects for international expansion. (TechCrunch)
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THE DOWNLOAD
Fortune writer Jonathan Vanian on whether tech's titans are distracted by deal-making.
Technology giants like Dell, EMC, and Hewlett Packard Enterprise are so busy with corporate restructurings that they may be falling behind companies like Amazon and Microsoft in selling and developing cutting-edge enterprise technologies.
That’s the view of Adrian Cockroft, a technical fellow with venture capital firm Battery Ventures, who said on Wednesday that many big legacy technology companies aren’t moving fast enough to compete in hot new technologies used in data centers. As a result, their growth is suffering.
Cockroft made his comments in San Francisco at the Structure business technology conference, with which Fortune is a media partner. He is a respected figure in the business technology world who once worked at Netflix, where he helped move the streaming video company’s infrastructure to Amazon Web Services, Amazon’s cloud-computing arm. (Fortune)
MORE FORTUNE TECH COVERAGE
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Here's Fortune's Survey on How Americans Viewed Jewish Refugees in 1938 by Fortune Editors
M&A Deal Leaks Are Being Plugged by Dan Primack
ONE MORE THING
These foods are most likely to get you sick. Foodborne illnesses cost the economy $15.5 billion each year. Poultry, which can contain the bacterium campylobacter, is the most dangerous. (Fortune)
This edition of Data Sheet was curated by
Robert Hackett
