Square appears to be bleeding cash fast, so the company has been talking with a number of companies about an acquisition, according to a report in The Wall Street Journal. The report cites three unnamed sources who say the company’s losses are increasing. It also echoes another report we heard from Re/code earlier this month.
Square still far from a deal
Although the payment company is apparently still far from actually finalizing a deal with any company, it has reportedly been holding talks with a number of companies since earlier this year. As far back as 2012, Square was said to be talking with Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG) about a buyout. However, it isn’t clear whether the two companies are still negotiating.
The sources also said Square has talked informally with Apple Inc. (NASDAQ:AAPL) and eBay Inc (NASDAQ:EBAY) subsidiary PayPal in the past. However, those talks apparently never became serious.
Square posts widening losses
Two sources told The Wall Street Journal that in 2013, Square posted about $100 million in losses, which was worse than its losses in the previous year. In just the last three years alone, the company was said to have used up over half the $340 million it raised through equity financing since it was started in 2009. Twitter Inc (NYSE:TWTR) co-founder Jack Dorsey actually started the company.
A Square spokesperson apparently claimed they had never been in talks about an acquisition with Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG). He also said although the company may be “an attractive” acquisition target, they haven’t “seriously considered” selling or “been in any talks to do so.
eBay Inc (NASDAQ:EBAY)’s PayPal also said they never spoke with Square about acquiring the company.
What would Square be worth?
If Square really was talking acquisition, the company could possibly sell itself for billions. The company’s brand, along with Dorsey’s reputation, has enabled the company to raise money for significant valuations. Sources claim that insiders at Square sold shares in the company on the secondary market for a price which placed about a $5.2 billion valuation on the company.
Square is said to have processed over $20 billion worth of transactions through its recognizable square-shaped credit and debit card readers last year alone. That reportedly yielded $550 million in revenue, according to The WSJ’s sources. The problem facing the mobile payments provider is extremely thin profit margins, as Square charges just 2.75% for each swipe of a card. Approximately four-fifths of that goes toward fees to Mastercard Inc (NYSE:MA), Visa Inc (NYSE:V) and other intermediaries, as well as to cover fraud which occurs.
Square looks for strategic options
During the first three months of the year, executives reportedly told a company which was considering buying it that they had about nine months before they would have a cushion of cash set aside. This month, Square apparently secured a $100 million credit facility from a group that includes five banks. The company was said to have considered doing an initial public offering, although the talks on that subject were said to be suspended, at least temporarily.
The sources claimed that negotiations between Square and Google Inc (NASDAQ:GOOGL) (NASDAQ:GOOG) began again over the last few months, although it is unclear whether they are still negotiating.