Square (SQ) is ranked 7 in the Fintech 50 Index of publicly traded Fintech stocks and describes itself as “tools to empower businesses and individuals to participate in the economy. Sellers use Square to reach buyers online and in-person, manage their business, and access financing. And individuals use Cash App to spend, send, store, and invest money”.
The company has been making big moves in Crypto during both bull and bear markets:
– 2018: bitcoin trading on Cash App. This is like Revolut, Coinbase, Robinhood; it drives revenue but is far from unique.
– 2019: Square Crypto contributing to bitcoin open-source work and Cryptocurrency Open Patent Alliance (COPA), a non-profit organization encouraging crypto innovation and opening access to patented crypto inventions. This, in the depths a bear market, demonstrates commitment to a vision.
– October 2020 Square Invests $50 Million in Bitcoin to buy 4,709 bitcoins. This is worth over $200m today. The price is of course volatile, impacting quarterly results that drive headlines such as “Square posts $45 million in bitcoin-related impairments in second quarter” which long term investors tend to ignore as it is not core to their business.
– March 2021: Square Bought Tidal for $300 Million March 2021. Huh? Tidal is often referred to as the “under-performing music streaming service headed up by Jay-Z”. The deal makes no sense on hard metrics. However Tidal is owned by artists like Jay-Z who will keep some of their shares in Tidal as it gets absorbed by Square. Jay-Z is the only artist taking an active role at Square with a seat on its board of directors. The strategic logic is around building a “Square for Artists” through artist connections with the Cash App. The app is already a hit within the hip-hop community, so having all the artist owners/partners of Tidal connecting and promoting the Cash App could help bring more users to both services.In this vision, Square can do for artists what it did for restaurants and small businesses.
– July 2021: Square is building a decentralized finance business using bitcoin. See here for our 4-parter on DeFi. Square’s focus is creating an open developer platform to build “non-custodial, permissionless, and decentralized financial services”.
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