- Square has sold off 10% this week after an analyst price target cut.
- Investors face the upcoming volatility of the first earnings report of the public company.
- The valuation doesn't warrant owning Square with the headline risk.
One of the biggest risks investing in an IPO is the initial earnings report. For a new public company, investors have no reference as to how corporate executives guide, be it conservatively or by over-inflating growth expectations to attract investors. Not to mention, the confusing aspect of accurately reflecting the new share count in expectations and the general impact of more public awareness about the business, offset by an executive team distracted by the IPO process. The end result is a messy initial quarterly report.
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