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The former Twitter CEO Jack Dorsey’s fintech firm Square recently announced a rebranding to ‘Block’ in a knowing nod to the company’s intentions toward becoming a major blockchain financial services provider. Dorsey had only left his role at Twitter a matter of days before announcing the name change for Square, but will this action be enough for the firm to overcome a recent downturn for its stock?
After being founded in 2009 as a credit card reader business, Square Inc has undergone a rebranding to Block Inc as a means of broadening its services toward blockchain technology, music and cash transfers.
As Dorsey left Twitter in early December, it was widely speculated that he would dedicate more time to Square, which Dorsey co-founded.
Source: Insider
As the chart above shows, the expected rate of adoption for cash apps in the US looks set to explode as the decade progresses indicating that Dorsey’s move may be a tactical one toward an industry with great growth potential.
Dorsey explained in a statement,
“We built the Square brand for our seller business, which is where it belongs. Block is a new name, but our purpose of economic empowerment remains the same. No matter how we grow or change, we will continue to build tools to help increase access to the economy.”
As a blockchain enthusiast, it’s understood that the rebranding will pave the way for a deeper level of involvement between Square and the developing world of decentralized blockchains.
The rebranding from Square to Block was in effect from December 10, 2021, but the company was quick to clarify that its stock market ticker will remain as ‘SQ.’ However, while its name on Wall Street remains the same, will the stock itself undergo any short or long term price movements off the back of the news?
Following in the footsteps of Facebook
In undergoing a rebranding, Square has found itself following in the footsteps of Facebook Inc, which changed its name to Meta in October.
Like Facebook, which opted to keep its old name for the company’s social media platform, Square is going to still exist for the company’s seller business which is based on payment systems and banking products for merchants. Block is set to be the new name of the company’s corporate identity.
Despite Square changing its name, like Facebook, to better prepare for the emergence of a new technological landscape, Jack Dorsey and Mark Zuckerberg have famously never seen eye-to-eye. Dorsey has sought to undermine Zuckerberg on many occasions and has even poked fun at the Facebook founder’s fixation on the metaverse that led to Facebook Inc becoming Meta. However, just two months later, Dorsey’s passion for blockchain has led to the emergence of Block.
Arresting a stock downturn
Square’s rebranding comes at a delicate time for the company’s stock market performance. Between October 21 and December 2, 2021, shares in Square Inc have tumbled 29.5%.
Although we’re seeing a significant downturn in the recent performance of Square, there doesn’t appear to be any fundamental flaws in the company’s performance of late, which indicates that the company’s tumbling share price is more likely due to broader tech stock sell-offs across the market.
The hiking of inflation rates around the world appears to have created widespread jitters among investors which have seeped into various otherwise comfortable stocks.
Public company rebrands don’t happen every day, which makes the case of Square and Facebook’s recent name changes highly unusual. In recent years, these instances have become far more obscure, owing to the fact that businesses are generally choosing to remain private throughout their developmental stages.
Maxim Manturov, head of investment research at Freedom Finance Europe, points to the case of fintech giants Revolut, and the company’s decision to stay private despite recently obtaining a $33 billion valuation,
“The company’s founder has said that the company does not yet have a timetable for an IPO, as the initial target is to reach billions of dollars in revenues, which would allow for a successful IPO.”
Fellow financial services company, Stripe, has recently confirmed that the company has no plans for an IPO on the horizon, with co-founder John Collison claiming that,
“Part of where our patience stems from is the fact that it feels like we are very early in Stripe’s journey.”
However, we only need to zoom out to see that Square must still be regarded as an excellent example of a growth stock. Despite the global pandemic, the company’s stock has consistently rallied into 2021, and despite a recent inflation-driven downturn, SQ has still grown some 1,353% in the six years following its debut.
Although its recent rebrand represents the company’s most pivotal change of direction since going public, SQ still looks like an excellent example of a growth stock that’s about to embrace a rapidly growing sector in blockchain. With this in mind, it’s reasonable to expect that Square’s stock will continue to grow on a long-term scale.
Dmytro Spilka is a finance writer based in London and the founder of Solvid and Pridicto. His work has been published in Nasdaq, Kiplinger, Financial Express, VentureBeat and The Diplomat.
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Source: https://dailyhodl.com/2022/01/07/square-becomes-block-could-jack-dorseys-rebranded-fintech-hold-potential-for-investors/