Square drops IPO price amid worries of rate hike

SAN FRANCISCO— Square bounced back in its stock market debut Thursday after the once-hot mobilepayments service slashed the price of its initial public offering to get the deal done.

The six-year-old company’s shares gained $4.07 (U.S.), or 45 per cent, to close at $13.07. The surge helped ease the pain of a mortifying markdown in Square’s IPO price. The San Francisco company sold 25.7 million shares at $9 apiece after money managers, leery of Square’s unprofitable history, refused to pay $11 to $13.

The concession appeared to attract bargain hunters betting that Square is worth the price that its management team had been demanding in the IPO. Even with Thursday’s rally, Square’s stock remains below the $15.46-per-share price that the company fetched a year ago when it raised $180 million as a privately held startup.

Most of the investors who participated in last year’s fundraising will be issued additional shares to compensate them for the reduced IPO price.

Investors’ skittishness toward Square, known for its debit and card readers that plug into mobile devices, reflects uncertainty about the direction of the global economy as the Federal Reserve Bank prepares to raise short-term interest rates for the first time in nearly a decade, said James Gellert, CEO of the research firm Rapid Ratings.

“Large, institutional investors taking a risk on technology want a discount now,” Gellert said. “There is a lot of concern about more market volatility in the year ahead.”