Square Said to Hold Offering at $5 Billion Valuation

Square Inc., the payments startup co-founded by Twitter Inc. (TWTR) Chairman Jack Dorsey, has authorized a tender offer of 1 million shares at $135.28 each, valuing the closely held company at $5 billion, people with knowledge of the matter said.

Rizvi Traverse Management LLC and other investors are seeking to buy the stock, which isn’t traded publicly, from employees and early shareholders, said the people, who asked not to be identified because the deal is private. Square was valued at $3.25 billion in August 2012.

Square, which is moving beyond smartphone-based payments services into retail outlets, is the latest San Francisco-based startup to seek a higher multibillion-dollar valuation. LendingClub Corp. held a secondary offering in November that valued the largest U.S. peer-to-peer lender at $2.3 billion, two people with knowledge of the deal said. Cloud-storage service Dropbox Inc. also sought funding in November at a valuation of more than $8 billion, two people with knowledge of the company’s plans said at the time.

The tender offer for Square’s shares is available to holders of common equity in the startup, the people said. Square, which has received funding from Kleiner Perkins Caufield & Byers, Sequoia Capital and Khosla Ventures, has 36 million to 37 million shares outstanding, another person said.

SecondMarket Holdings Inc., an online private-equity exchange, is facilitating the secondary tender offer, one of the people said.

Payment Competition

Amanda Sydor, a spokeswoman for SecondMarket, declined to comment. Lindsay Wiese, a spokeswoman for Square, declined to comment on the offer. Beau Allen, a spokesman for Rizvi Traverse Management, didn’t respond to a request for comment.

The jump in valuation follows a year of fast growth for Square. Its workforce has increased by 75 percent, from 400 at the beginning of 2013 to 700 employees this month. Starbucks Corp. invested $25 million in the payments provider in 2012 and began using Square’s services in 7,000 of its stores.

Square also rolled out a product that lets merchants ditch old cash registers for payment machines using Apple Inc. (AAPL) iPads. Square said it’s processing tens of billions of dollars in payments on an annualized basis. The company said in May 2013 that it was processing $15 billion, excluding Starbucks.

The startup competes with EBay Inc. (EBAY)’s PayPal, which has rolled out its payments software in more than a million physical stores. Both companies are vying for consumers’ wallet loyalty, along with Google Inc., retailers, banks and startups in an increasingly crowded payments industry.

Square began offering a stamp-sized credit-card reader in 2009 that lets merchants accept payments on the go, originally targeting small proprietors. The company charges a fee of 2.75 percent per transaction, along with free software.

The Information earlier reported on Square’s secondary offering at a $5 billion valuation.

To contact the reporters on this story: Ari Levy in San Francisco at alevy5@bloomberg.net; Danielle Kucera in San Francisco at dkucera6@bloomberg.net

To contact the editor responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net

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