How would Square’s IPO impact its balance sheet and income statement?

Square, Inc., is an electronics payment company. Its small credit card readers plug into smartphones, making it easy for sellers to accept credit and debit card payments. Jack Dorsey, the founder of Square and Twitter) is said to have been inspired to start Square in 2009 when a friend of his was unable to complete a $2,000 sale of glass faucets because he had no way to accept a credit card (source: Wikipedia.)

In November 2015, Square completed its Initial Public Offering (IPO.) In the IPO, Square issued 29,700,000 shares of its Class A Common Stock with a par value of $0.0000001 per share in exchange for cash of $9 per share.  After deducting underwriting and offering expenses, Square’s net proceeds from the IPO were $245.7 million.

Questions

1. On the date of the IPO, how would Square’s balance sheet have been impacted? What about its income statement?
2. Since the date of the IPO, Square’s stock price has fluctuated from a low of $8.37 (February 8, 2016) to a high of $13.09 (December 31, 2015.) Does the fluctuating stock price have an impact on Square’s total stockholders’ equity?  Why or why not?

Instructor Resources

These resources are provided to give the instructor flexibility for use of Accounting in the Headlines articles in the classroom. The blog posting itself can be assigned via a link to this site OR by distributing the student handout below. Alternatively, the PowerPoint file below contains a bullet point overview of the article and the discussion questions.

• Student handout (pdf) (word) (contains entire blog posting + discussion questions)
• PowerPoint file (brief article overview + discussion questions)

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