Square, the mobile-payment company run by Twitter CEO Jack Dorsey, is suffering its worst day of trading ever, down nearly 20% today. The drop comes after the company reported weak first quarter results yesterday, with losses doubling from a year earlier, to $96.8 million.
And while things seem grim now, they could get worse in the coming days. Square’s lock-up period, the time during which early investors are forbidden from selling their stakes in a newly public company, is ending on May 17. That means early investors such as Visa, Khosla Ventures, Sequoia Capital, Starbucks, and others will be able to unload their shares in Square, which could push the stock down further.
Finding an exit could be particularly appealing to venture capital firms, due to the scarcity of opportunities they’ve had to cash in on investments through acquisitions and public offerings recently. Khosla Ventures, which first invested in Square in 2009, owns 17% of the company. Sequoia has held a stake since 2011 and owns around 5%.
Square’s results were hit by a one-time $50 million charge to settle a suit with a college professor who said he designed Square’s credit card reader, and there were positive signs in the report. The company’s revenue rose 51% year-over-year to $379 million, which beat expectations, and revenue from Square’s services outside of payment processing grew 197% from a year earlier.