Steven Cohen builds 5.4% stake in Square

Jack Dorsey, CEO of Square and CEO of Twitter, speaks during an interview November 19, 2015. REUTERS/Lucas Jackson/Files©Reuters

Jack Dorsey, Twitter co-founder

Steven Cohen’s $ 11bn family office has built a 5.4 per cent stake in Square, the payment processing company run by Jack Dorsey, Twitter co-founder.

Point72 Asset Management, the successor to the billionaire investor’s hedge fund SAC Capital, has bought 6.66m shares, according to a filing with the Securities and Exchange Commission.

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Square has been facing stiffer competition in the payments business including from large incumbents PayPal and First Data, which launched a new credit card reader geared towards small businesses earlier this year. Square has expanded beyond its core, for example, acquiring food delivery app Caviar, but that too operates in a crowded market. The company is also moving into bank loans with its Square Capital business, lending to small businesses that use its devices and software to process payments.

In the six months to the end of June, cash and cash equivalents at Square fell 27 per cent to $ 342m, as it spent more on product development.

But the merchant payments company did better than expected last quarter, beating Wall Street estimates for adjusted revenue with $ 171m, higher than the $ 154m forecast. Investors are focused on Square increasing revenue as it continues to make a loss on a generally accepted accounting procedures basis.

The company, best known for its small, white square payments readers that slot into iPads and iPhones, is run by Mr Dorsey, who is also chief executive of Twitter. Twitter’s stock has fallen 35 per cent in the past year, but investors appear more confident that Mr Dorsey can handle the two top jobs after keeping them both for more than a year.

Shares in Square have fallen by about a quarter since their April peak. They rose 0.4 per cent to $ 11.80 on Friday, valuing the company at just over $ 4bn.

Square did not respond to request for comment, and a spokesman for Point72 declined to comment.

Mr Cohen’s SAC ballooned from $ 25m in assets in 1992 to a $ 15bn enterprise, generating returns of 30 per cent a year.

That record caught the attention of regulators, who spent a decade investigating allegations that SAC’s success was fuelled by an unfair advantage. In 2013 the hedge fund pleaded guilty to insider trading and paid $ 1.8bn in fines.

Mr Cohen was not charged with any offence, but he is banned from overseeing client money until 2018. This week, the Commodity Futures Trading Commission said that it was restricting Mr Cohen’s registration until 2018.

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