Square Valued At $2.9 Billion In IPO, Short Of Expectations

Square's CEO, Jack Dorsey

Justin Tallis / AFP / Getty Images

Square got a chilly reception from Wall Street on Wednesday, as it began life as a publicly traded company.

In a disappointment for the once-hyped payments company, Square priced its initial public offering at $9 a share, a full $2 below an expected price range, according to a person briefed on the matter. At that level, the company was valued at $2.9 billion, a far cry from the reported valuation of $6 billion that the company achieved in its last round of private financing last year.

The lackluster market debut of Square, one of the most promising tech startups of recent years, could reverberate throughout Silicon Valley, where many startups are now valued by investors at $1 billion or more. Many investors will likely view Square's performance as a barometer of public market sentiment toward such ambitious valuations.

Square is set to begin trading tomorrow on the New York Stock Exchange under the ticker symbol "SQ."

Square's IPO is just one data point, but it's a prominent one. Judging by Square's debut on Wednesday, there's a roughly 52% gulf between what Silicon Valley thinks a company is worth and what Wall Street investors are willing to pay.

Big investors especially appear to be growing anxious. In recent months, a few big mutual funds marked down the value of the shares they hold in some major tech startups. Fidelity, for example, has lowered its estimate of the value of its holdings in Snapchat, Dropbox, and Zenefits.

None of these companies has been willing to brave the public markets. And the 52% discount Square accepted on Wednesday could reinforce startups' anxiety about heading to Wall Street.

Such a large drop in value is rare among billion-dollar IPOs. It surpasses the 42% plunge Zynga experienced when it went public in 2011, according to data from PitchBook. It is also larger than the 32% decline that Box, the data storage company, experienced when it went public in January.

Still, valuations in public markets are not perfectly comparable to private ones. When big startups raise money in private, investors often get special provisions protecting them against losses and encouraging them to grant a higher valuation. In addition, private valuations can include the value of options, which usually aren't counted when a company goes public.

As Square was preparing to go public in recent weeks, the company said it expected to price its shares between $11 and $13. Even at the top of that range, the company would have been worth less than in its reported value in private markets.

The low price Square negotiated on Wednesday means the company will raise a smaller amount of money in the offering. Including shares sold by Square and by an investor, the IPO will raise about $243 million.

It also has implications for Square employees, early investors, and other owners of Square shares. Big investors in the most recent round of private financing negotiated a provision called a ratchet, under which they will receive enough additional shares to give them a 20% return in the IPO. Whenever a company issues additional shares, existing shareholders see their ownership stakes diluted.

Square, which was founded in 2009, made its name on the white, square-shaped credit card readers used by small businesses. Payments still account for nearly all of the revenue for the money-losing company.

But Square is attempting to undergo an important transition. According to a video shown to prospective investors, Square thinks its future lies not merely in payments but also in a collection of software and services aimed at small businesses. These relatively new features, including a merchant cash advance program, are intended to help Square stand out from other payments firms, though they have yet to contribute significantly to the company's revenue.

Another top concern for investors is that the CEO, Jack Dorsey, will be splitting his time between Square and Twitter, the social media company he co-founded and which he also runs.

Square has said in regulatory filings that Dorsey's dual role "may at times adversely affect his ability to devote time, attention, and effort to Square."

Walmart Workers On Hunger Strike Confront Clinton Staff At Campaign Headquarters

Cora Lewis

Current and former Walmart workers protested at the Brooklyn headquarters of Hillary Clinton's presidential campaign Wednesday, calling on Clinton to address Walmart's pay and labor practices and noting her "long-standing ties" to the company, where she served as a board member from 1986 to 1992.

The protest came a day after the Service Employees International Union, a powerhouse in the labor movement and backer of the Fight For $15 minimum wage campaign, officially endorsed Clinton for president. While Clinton has spoken in support of a $12 minimum federal hourly wage, she has stopped short of calling for the $15 minimum that is becoming a widespread demand among labor activists.

After a heated exchange with security in the building lobby, the protesters — including seven who are fasting as part of a national hunger strike against the retailer — had an impromptu sidewalk meeting with Clinton campaign labor outreach director Nikki Budzinski.

"I hear you. We hear you," she told the group. "We know this is an important issue."

Initially, building management asked the workers to leave the lobby and threatened to call the police, before eventually agreeing to deliver a letter signed by the fasting workers to the campaign offices.

"This week, in NYC, and across the country... [we] are fasting for $15 an hour and full-time, predictable schedules," the workers wrote in the letter. "Instead of hiding our hunger and hiding the reality of skipping meals, we are taking our struggles with food insecurity public.

"We all need our country's largest employer to set a new standard, and we need you to lead," it read. The workers specifically asked for a meeting with Clinton and for her to publicly call on Walmart to raise pay and provide more predictable schedules.

Cora Lewis

Talking with the workers after the letter was delivered, Budzinski underscored Clinton's commitment to issues the advocates mentioned, including paid family leave, paid sick leave, and raising the minimum wage. She listened to workers emotionally recount their difficulty paying for groceries for their families and sleeping in cars in the Walmart parking lot.

“This is happening right now,” said Mary Watkines, who has been fasting since Monday and worked at Walmart for 15 years. “The hunger is real, you know. Children shouldn’t have to suffer because their parents can’t make it on minimum wage... And we need Hillary’s help with this, because it’s been a long fight.”

In a statement, Walmart said it is "proud of the wages and benefits package we offer. Our average full-time hourly associate earns more than $13 an hour in addition to the opportunity for quarterly cash bonuses, matching 401(k) and healthcare benefits." The company announced earlier this year that its minimum wage would rise to to $10 an hour in 2016.

Budzinski said that Clinton is dedicated to raising the minimum wage, adding, “She’s not going to stop talking about raising wages. She knows this is important to addressing inequality.”

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Since Monday, more than 100 current and former Walmart workers have been on a liquid-only diet, according to organizers, and they will continue to fast, subsisting on water, apple juice, black coffee and chicken broth for the fifteen days leading up to Black Friday, one of the biggest shopping days of the year. Workers say they are fasting to call attention to the low pay they say leaves Walmart staff struggling to fill their refrigerators year-round.

"While Walmart employees can barely put food on the table this Thanksgiving, Walmart continues to thrive as the largest supplier of groceries in the nation," the group said in a statement.

OUR Walmart member Jennifer Green traveled with her 19-month-old daughter, Jasmine, from Norfolk, Virginia to New York for the fast.

Cora Lewis

Clinton today released a video publicly thanking the SEIU's 2 million members for yesterday's endorsement. She specifically named home care, child care, and fast food workers in the message, all of whom have been organizing recently for better pay and working conditions in campaigns backed by the SEIU.

"I was thrilled to celebrate with you when fast food workers won a $15 minimum in NY, a big victory in your important efforts to fight for 15 and for a union in communities across America," Clinton said in the video. "Your fights are my fights."

From left, Our Walmart members Patricia Locks, Tiffany Flowers, Mary Watkins, Osvaldo Alonso, Denise Barlage, and Tyfani Faulkner, in the lobby of Clinton’s Brooklyn campaign headquarters.

Cora Lewis

Urban Outfitters Drops To 6-Year Low After Pivot To Pizza

The company isn’t spending all that much to acquire a chain of Italian restaurants, but that, combined with its results yesterday, left a bad taste in investors’ mouths.

Wall Street Journal / Via wsj.com

Urban Outfitters' stock closed at a six-year low on Tuesday, after the combination punch of reporting tepid earnings and announcing the acquisition of a gourmet pizza chain.

The acquisition of a group of Italian restaurants, including Pizzeria Vetri, was touted as a way to help drive traffic to stores yesterday, as well as a successful standalone concept.

"A big attraction of this concept is the enormous breadth of its appeal," CEO Richard Hayne said on an earnings call yesterday. "Very young to very old, everyone loves great pizza."

Academic research backs up Hayne's claim: everyone really does love great pizza. But Wall Street isn't shouting Mozzerella Tov just yet. Instead, the move has confused analysts and investors, and served as a warning shot for the retail industry.

The purchase represents an "overly optimistic solution to reverse a decline in sales momentum," Eric Beder, an analyst at Wunderlich Securities wrote today. He added that the company is facing a "crisis of investor confidence."

Worse, while the retailer's purchase might be viewed as a creative solution to declining foot traffic in malls, it served as "a form of affirmation that the traffic-dependent retail model is facing structural concerns," Simeon Siegel, an analyst at Nomura Securities, wrote in a separate note today.

That concern was reflected in Urban's stock: After falling 7.4% on Monday it tumbled another 3.8% Tuesday, closing the day at $21.80. That's the lowest closing price since July 2009.

Deliciousnessrules.tumblr.com / Via giphy.com

Urban Outfitters' purchase of the Vetri Family group of restaurants, which also includes higher-end Italian eateries in Philadelphia, cost less than $20 million, the company told Bloomberg News. The company's CFO, Frank Conforti, told the news outlet that it will spend only $1 million each to add new restaurants.

Hayne told investors yesterday that new locations "can be standalone restaurants or part of a larger retail complex."

Urban Outfitters reported sales and earnings that missed analysts' estimates, amid weaker-than-expected customer traffic — something Nordstrom and Macy's also noted last week. In addition the company, which also owns Anthropologie and Free People, has been dealing with a shaky transition to a new fulfillment center, and is recovering from missteps at the Urban and Anthropologie brands.

"We wonder what the overriding need was to invest the company's capital when they could have probably franchised the restaurant expansion," Beder of Wunderlich wrote of the company's decision to invest in the restaurants. "Frankly, it seems a poor use of company capital."

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Doctors Want To Pull Drug Ads From TV And Magazines

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You can't watch TV for long before seeing a commercial for a big pharma drug (with its comically long list of side effects). But the biggest medical organization in the U.S. would like that to change.

After wrestling with the issue for well over a decade, on Tuesday the American Medical Association (AMA) called for a ban on direct-to-consumer advertising of prescription drugs and medical devices.

The announcement came from members at an AMA meeting in Atlanta.

“We want to spend our time diagnosing and treating patients, not rebutting marketing claims," Michael Miller, a delegate of the Wisconsin Medical Society, argued at the meeting, according to Bloomberg.

“Drugs aren’t like everything else, people don’t need to be sold on the newest and brightest drug,” Lisa Schwartz, a professor of medicine at the Dartmouth Institute for Health Policy and Clinical Practice, told BuzzFeed News. “People need to be educated on the benefits and harms, but that’s not what drug ads do.”

It's unclear how much effect this call will have, however, given that such a ban would require an act of Congress.

The United States is one of only two countries (the other is New Zealand) that allows direct-to-consumer advertising, such as TV and magazine spots, for prescription drugs. Drug companies spent $4.5 billion on consumer marketing in 2014. This investment, according to the AMA, fuels higher drug prices.

The FDA only requires that a new drug perform better than a placebo. The agency does not test whether a new drug is better than an older (and generally cheaper) drug.

To get doctors to write prescriptions for new drugs that cost more and don't necessarily make people healthier than the ones they're familiar with, drug companies try a lot of tactics. They run training courses to convince doctors to switch, they meet with doctors in their offices, and they run ads in journals and magazines that doctors are most likely to read.

But they also ramp up pressure by targeting patients directly. "Talk to your doctor" is a phrase that every American TV watcher is familiar with.

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American consumers are also concerned about these pharma ads: A recent poll by the Kaiser Family Health Foundation found that 89% of respondents thought that the FDA should review prescription ads before they air. Currently, it's against federal law for the agency to do so; instead, it relies on consumer complaints after the ads have run.

The AMA has been wrestling with direct-to-consumer ads since at least 2001. Members called for a temporary moratorium in 2006, then voted against a ban in 2007 and 2008. The previous policy on consumer advertising outlined what the AMA considered an acceptable advertisement.

The new policy does not specifically address the rise of social media advertising, such as when Kim Kardashian got a warning letter from the FDA for running a morning sickness advertisement on her Instagram without proper safety information.

“In the old days, DTC was the one way they tried to reach consumers. Even if you got rid of all the magazine ads and TV ads, there’s still a tremendous platform to reach consumers” in social media, Steven Woloshin, a professor of medicine at the Dartmouth Institute for Health Policy and Clinical Practice, told BuzzFeed News.

Critics at the meeting said that the ban would limit the free speech of drug companies and doctors, and that some advertising helps teach consumers about conditions they might not otherwise seek help for, such as depression, according to Bloomberg.

Others say that banning direct-to-consumer advertising isn't enough.

"It would have a much greater impact if it also went on to address promotion to physicians," Joel Lexchin, a professor in the School of Health Policy and Management at York University, told BuzzFeed News by email.

"In dollar figures the amount of money spent promoting drugs to doctors is 10 times more than the amount spent on [advertising]," Lexchin added. "And doctors are the ones who make the ultimate decision about what drugs to prescribe."

International Student Numbers At U.S. Colleges Grew At The Fastest Rate In 35 Years

Seth Wenig / AP

The number of international students at American colleges rose faster this year than it has in decades, as schools worked harder than ever to lure the lucrative students and their tuition dollars.

International enrollment grew 10% to almost 975,000 students in 2014-2015, the fastest rate in the United States in 35 years, according to a report released Monday by the Institute of International Education. Rather than relying on financial aid, most international students — and the vast majority of undergraduates — finance the full cost of their education themselves, the report said.

Some schools grew their international enrollment even faster than the national average. New York University, which enrolls more international students than any other college in the country, grew its international enrollments by 18% — part of a surge in overseas students heading to NYU in recent years. In 2002, just 4% of NYU students were international.

For NYU, that means sharply increased tuition revenue: the college says it provides only "limited" financial support to international students, and it admits them on a "need-aware" basis — meaning it considers if they can finance their educations when it decides whether or not to admit them.

Last year, the University of Arizona shot above the University of Illinois Urbana-Champaign, UCLA, and Purdue to become the public university with the highest international enrollment. It increased international enrollment by 30% in the space of a single year, according to the report.

At public institutions like Arizona, and the University of Illinois Urbana-Champaign — where a quarter of the school's 43,000 students are international — international students pay significantly more tuition than in-state students, and typically do not receive any institutional aid. Tuition for international students at Illinois is $28,000 a year, compared to $12,000 for in-state students.

Though the highest number of international students — some 300,000 — still come from China, the number of students from India shot up by almost 30% last year. There was an even more dramatic increase in the number of students from Brazil: last year, the country sent about 13,000 students to the United States, this year it sent 23,000, an increase of almost 80%.

Razor USA Glides Into The Hoverboard Market

The maker of the popular scooter told BuzzFeed News it bought an exclusive patent license, enabling it to sell boards in stores in time for the holidays.

From United States Patent No. 8,738,278B2 / Via Shane Chen/Google Docs

Hoverboards may be in major American stores in time for Christmas after all. Razor USA, the company behind the wildly popular scooters, has signed a licensing agreement to sell hoverboards in the US, BuzzFeed News has learned.

Razor paid inventor Shane Chen an undisclosed sum for exclusive rights to his patent for "a two-wheel, self-balancing personal vehicle."

The deal was inked "very recently," Katherine Mahoney, vice president of marketing for Razor USA, said in a Friday email to BuzzFeed News, declining to specify when negotiations began.

"The Hovertrax is a progressive extension of Razor's commitment to innovation in ride-on products," Mahoney said in the email. "Combining quality, technology and our dedication to giving our customers the most current in electric scooters, Razor is continuing its mission to expand the audience for electric-powered ride-ons."

Mahoney added, "There is a great deal of retail interest in the Razor Hovertrax and [it] will available for the holidays."

On Friday, BuzzFeed News reported that the billionaire businessman Mark Cuban had backed out of an earlier deal to acquire rights to Chen's patent, opening the door for Razor.

Hoverboards are likely to be one of the hottest retail items this Christmas season, and Razor's acquisition of Chen's patent could be a pathway for the scooters to make their way onto American store shelves. Until now, most of the boards have been sold online through a patchwork of large retailers and small Shopify pop-up stores, in part due to patent concerns.

Razor products are found in some of the nation's largest stores, including Wal-Mart, Target, and Toys R' Us, though the company declined to specify if its hoverboard would be in stores, online, or both.

"It is definitely a very significant cultural phenomenon," Carlton Calvin, founder and president of Razor USA, said in an interview with BuzzFeed News last month. "It's something that has captured my attention."

Calvin said last month that he had tried the hoverboard, which he found "easier than the solo wheel," but not as comfortable as Razor scooters.

"It's nice to have it so compact where the wheels are side by side on a hoverboard but we make things with wheels one in front of the other, which is inherently balancing like a bicycle," Calvin said. "You put one wheel in front and one wheel in back and that automatically balances you."

The Hovertrax won't be the only board available to holiday shoppers. Target told BuzzFeed News on Friday that it will be carrying a separate brand of hoverboard called the Swagway on its website this holiday season. The $500 device should be available online by the end of this week, a spokesperson said. The company added that it hasn't been able to disclose plans until now as "this is a hot item or the holiday season and we needed to find a vendor that could provide us with adequate inventory."

Overstock.com Has $10 Million In Gold And Silver Hidden Somewhere In Utah

Ross D. Franklin / AP

Overstock is best known for selling discount merchandise online, but the company has another trick up it's sleeve: it has hoarded food, cash and digital currencies in preparation for a disaster scenario that could cripple lesser online retailers.

"I want a system that can survive a three month freeze," CEO Patrick Byrne told BuzzFeed News. "If the whole thing collapses I want our system to continue paying people, we want to be able to survive a shutdown of the banking system."

The Utah based company has made headlines in the past for its drawn out fight with hedge funds it accused of manipulating the company's stock, and its CEO's interest in digital currencies. Byrne said the company maintains a 30 day supply of food, and has a distribution system to pay and feed employees in case the banking and payments systems collapse.

"In the 1930s there was a two week freeze on the banking system; in 2008 we came came perilously close to banks not knowing who could accept counterparty risk," Byrne said. "I think we’re living in the final days of the theory that Keynesian magic money tree can deliver actual wealth and growth."

In a call with anlaysts in early 2013, Byrne said the company is "determined to make Overstock robust in the face of that fragility and that includes owning some precious metals and maybe some Bitcoin."

Hoarding precious metals can come with risks of its own. The company said in a recent regulatory filing that the value of its metals was been hit by the global decline in commodities prices — they've gone down to $10.2 million from $10.9 million at the end of last year.

"We’re not rubbing our hands together gleefully waiting for it to happen," Byrne said. "We think of it as an insurance company with a 5% chance of paying off."

While the precious metal store — $6 million of gold and $4.3 million of silver — has been noted on financial disclosures, the uncommon risk mitigation measure got renewed attention when the company's former president Jonathan Johnson, who is running for governor of Utah, mentioned it in a speech to the United Precious Metals Association earlier this month. "I don't know if it will be two days or two weeks or two months. But we have $10 million in gold and silver in denominations small enough...for payroll," Johnson said.

The hoarding of coins and food may seem inconsistent with the company's investment in financial instruments based on digital currency, but Byrne both come from a his doubts about the current way the world is run. "In a deep sense, I do not trust the central banks and I don’t trust major institutions."

When asked exactly where the gold was — the company says it's in an "off-site secure facility" — Byrne told BuzzFeed News "it’s in a safe space in Utah. Utah has a lot of safe places."