Square Inc's initial public offering, priced at a 30 percent discount from the payments and lending company's private valuation, is one of the loudest signals yet that technology firms are struggling to keep their multibillion-dollar market caps.
While some of these "unicorns," referring to private companies valued at $1 billion or more, will buck that trend, bankers expect a procession of others to have to cut their values over the next year. Investors have begun to price private companies more consistently with the public market, which has taken a more conservative approach to valuation.
Already this year, one-third of US-based tech companies that went public priced their shares below their private value, according to data provided by market intelligence company Ipreo and data provider Pitchbook and analyzed by Reuters. A 30 percent drop puts Square's valuation discount among the steepest since the start of 2014, below the 40 percent of big-data company Hortonworks Inc and 32 percent for storage company Box Inc.