Jack Dorsey's Square IPO seen at US$4.2bn

The large gap underscores a lingering question for the latest crop of startups: Will they be able to fetch the same rich valuations they are getting in private markets when hawking their shares to public investors?

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The company, founded and led by Twitter Inc. CEO Jack Dorsey, announced that it estimates to price its initial public offering to be between $11.00 and $13.00 per Class A common stock. It plans to make 31 million shares available, according to new SEC filings.

Square is selling 25.65 million shares, raising up to $333 million, and has given its underwriters the option to sell a further 4.05 million shares for up to $52.6 million if demand allows. This valuation would be actually be well below its last round of private funding, when its Series E round valued its shares at $15.50, with a $6 billion valuation. The San Francisco-based company's venture-capital investors include Sequoia Capital, Khosla Ventures and Kleiner Perkins Caufield & Byers. Dorsey, 38, who owns 24.4 % of Square, didn't surrender the CEO job at Square when he returned to his former firm. Square said it will use the proceeds from the IPO for working capital, with the aim of the IPO to create a market for its shares. Revenues rose to $560.5m, from $371m in the same period previous year.

For instance, back in June the company started offering a payroll service to users of Square Register, which now offers a range of revenue-generating add-ons, like an invoice feature, an online scheduling tool for SMBs, and an order-ahead function dubbed Pickup. "Up until now, technology growth companies have been able to stay private and continue to raise at increasingly high valuations and assume that eventually when they IPO they will get an even higher valuation". The coffee chain made up 17 percent of revenue a year ago. A few of the losses were due to a money-losing deal Square signed with Starbucks (SBUX) that is ending next year. In October - when Square first filed the paperwork for its IPO - Square had planned to offer stock valued at $275 million. The company's stock has been approved for listing on the New York Stock Exchange under the symbol "SQ".