Case 2 Questions: Square, Inc.

IPO
1. Please answer all questions. Be precise and answer to the point.
2. Approximately the answer to all questions should be about 8 to 10 typed pages.
3. Professional presentation, extra research and financial analysis are rewarded.
4. The cases are group effort and are judged accordingly.

1. Initial Public Offering: Why did Square, Inc. go public? What are the normal
methods, and normal costs of going public? How does the underwriting process used by
financial institutions in IPO mitigate informational asymmetries? For an investor, what
are the risks and rewards from investing in an IPO?

2. Business Model: How does Square, Inc. make money? What are the value drivers of
its business? What is Square, Inc.’s market potential? What is Square’s comparative
advantage over other payment aggregator competitors?

3. Valuation: How do we value shares of high technology shares, and unicorns such as
Square, Inc.? (Refer NYU Professor Damodaran on Valuation website!) Based on its
financial history, what do you think is the intrinsic value of a Square share? How does
this valuation compare to the price talk from the underwriters prior to the IPO? Based on
its risk reward structure would you recommend investment in this IPO at the time of
issue?

4. Pre-IPO History and Regulations: What was going on in the U.S. IPO market prior to
Square’s offering? How have the regulations influenced the issuance of Square, Inc.’s
IPO?

5. Recommendation:

Who were the winners and losers of the Square IPO?

What were the broader market implications of the Square IPO?
In your opinion did Square and the underwriters underprice the IPO, or had the pricing
strategy been correct in ensuring market demand after the IPO?
If you had invested $10,000 in this IPO what would be your return November 15, 2018?
What is the future potential of Square, Inc.?

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