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TheStreet Open House

Square Could be Worth $4.5B

NEW YORK (TheStreet) -- With Twitter's (TWTR) initial public offering taking up most of today's news coverage, another Jack Dorsey company, the mobile payments startup Square, is thinking about going public.

San Francisco-based Square, which charges a flat 2.75% fee on credit card payments, could be worth as much as $4.5 billion, based on recent private market transactions, a source close to the situation said. One large seller has been offering $40 million worth of stock, at $125 per share, as interest in the company continues to climb, lifted by the recent run-up in technology stocks.

Square's last financing round, which Starbucks (SBUX) participated in, reportedly valued the company at $3.25 billion.

Other Square investors include Rizvi Traverse Management, Kleiner Perkins Caufield & Byers.

Square could not be reached for comment for this story.

Square has been expanding its offerings in recent months. The company recently launched Square Cash, a threat to eBay's (EBAY) PayPal payments ecosystem. It also unveiled Square Market, building out its ecosystem for small businesses and merchants.

Yesterday, The Wall Street Journal reported that the company has been speaking with investment banks including Goldman Sachs (GS) and Morgan Stanley (MS) about a 2014 IPO. There has been speculation in recent days about a potential initial public offering for Square, with the company recently hiring former Goldman Sachs CFO David Viniar to take the spot of Starbucks CEO Howard Schultz on its board.

As of May, Square was processing $15 billion in transactions on an annualized basis. The Journal reported that number has since been upped to around $20 billion. Based on a 2.75% flat fee, that would put Square's annual revenues at around $550 million. However, a good chunk of that, perhaps as much as 80%, goes to Visa (V - Get Report) and Mastercard (MA - Get Report).

Visa invested an undisclosed sum in Square in 2011. There's been speculation that the payments giant could ultimately wind up buying Square outright, despite Square still not being profitable, according to public statements made by Dorsey.

--Written by Chris Ciaccia in New York

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