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For IPO Investors, Will it Be Hip to Be Square?

By U.S. News & World Report

If you think you’ve got a thorny to-do list, consider what Square co-founder and CEO Jack Dorsey has tucked away on some tablet or laptop:

1. Take over as Twitter CEO. (Check: Did that last week.)

2. Lay off up to 336 people at Twitter. (Check: #BigBummer.)

3. File papers to take Square public. (Check: Square filed plans this week to offer $275 million in shares in an initial public offering.)

4. Inhale breakfast. (Hold off until next week.)

Indeed, the 38-year old tech wizard has his work cut out for him. And with his birthday less than a month away, he might want to ask for a dozen gift-wrapped Wall Street gurus as a present. To borrow from financial experts, Dorsey doesn’t just have his hands full: If he were an eight-armed Hindu goddess, he’d have all those hands full, too.

“The big challenge is that Jack Dorsey has been interim CEO of Twitter and Square CEO since June,” says Todd Antonelli, managing director of the Berkeley Research Group in Chicago and senior advisor to high-tech Silicon Valley business leaders. “Only someone who’s 30-something could pull this off.”

But one thing Dorsey cannot conjure, at least for now, is a sea change in the balance sheet of Square, a digital payments company named for the small plastic device that plugs into the audio jack of smartphones or tablets. According to its SEC S-1 filing, Square reported a net loss of more than $77 million for the first six months of 2015, putting it on pace to match its 2014 total losses of $154 million.

What that means for investors, at best, is to proceed with caution and not throw all the eggs in a Square basket. “This is a high-risk investment with a potential high reward and perhaps should be part of a diversified portfolio of recent IPOs,” says David I. Kass, a clinical professor of finance at the University of Maryland’s Robert H. Smith School of Business.

Still, those who set their sights longer term may want to be a bit more adventurous. “It’s not uncommon for technology companies to be losing money when they go public,” says Imran Ahmed, a principal at OCA Ventures. “Box (BOX), Castlight Health (CSLT), Etsy (ETSY) and others have proved that you can go public despite heavy losses. However, I think it’s notable that many of these companies have traded down since going public.”

Square hopes to list on the New York Stock Exchange under the ticker symbol SQ. Investment wisdom may also depend on whether Square can advance on its ubiquity among small business. If it hopes to gain traction among bigger merchants, it faces daunting competition from the likes of PayPal Holdings (ticker: PYPL) and Visa (V).

A team led by K.C. Ma, director of the George Investments Institute at Stetson University, just completed a commerce market comparison two weeks ago pitting Square against its rivals, including PayPal, another recent IPO following its spinoff from eBay (EBAY).

For Dorsey, it’s not good news.

PayPal might be loathed by some consumers, “but if Square is trying to beat the PayPal fee, around 2.5 percent, they are not doing it yet because Square charges 2.7 percent,” Ma says. “And their margin after paying the credit card companies is so small — less than 20 to 30 basis points — which is why they are still at a loss.”

But could a pivot in payment methods benefit Square? Ahmed thinks so: “One feature of the U.S. payments landscape that may help Square break into larger merchant accounts is the shift to EMV credit cards,” he says. “That’s forcing many merchants to re-evaluate their legacy point-of-sale devices. I believe this will lead to many adopting Square.”

Meanwhile, private investors have already bought in, valuing the company at $6 billion. And if Dorsey’s a digital rock star, maybe his investor list will sway skeptical Wall Street types. The lineup includes Yahoo! (YHOO) CEO Marissa Mayer, Napster founder Shawn Fanning and Virgin Group mastermind Richard Branson.

What’s more, Dorsey may be able to ease investor worries about the overextended bandwidth of a double CEO. “A role of many CEOs is to serve as a broad strategic planners, as suppliers of vision,” says Paulo Prochno, a clinical professor of management at the Smith School. “That’s not necessarily time-intensive: It’s based more on your experience in the industry and your insights. You don’t have to work 50 hours a week to have a good insight into where your industry is headed.”

Where Twitter and Square are headed profit-wise, though, is another story: one that will expose Dorsey as either overly ambitious or incredibly ambidextrous in engineering near-term turnarounds. “He will need strong leadership teams at both as he revives Twitter and positions Square as a successful publicly traded company,” Antonelli says.

As for whether you’ll be able to buy Square stock with a Square swipe, it’s not likely — though Dorsey might want to pass the idea off to one of his minions the next time he has 15 seconds to spare.

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For IPO Investors, Will it Be Hip to Be Square? originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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