(New throughout, adds valuation information, background on Silicon Valley IPO picture)
By Sarah McBride and Dan Levine
SAN FRANCISCO, Sept 25 (Reuters) - Payments startup Square Inc plans to file for an “imminent” initial public offering, according to a source familiar with the situation, potentially putting it an a position to be a public company by the end-of-year holiday season.
Square, which has pioneered the use of instant payments over smartphones, is one of the most richly valued companies in Silicon Valley, worth an estimated $6 billion based on its most recent round of funding.
Earlier Friday, Fortune reported that Square would file for an IPO in the next two weeks. A spokesman for Square declined comment.
Market turmoil of the type seen in August, when the Dow Jones Industrial Average closed down 588 points in a single day, could derail IPO plans.
Square has become one of the most scrutinized start-ups in Silicon Valley. Many venture capitalists have privately questioned whether it is really worth the $6 billion valuation. The doubters have cited heavy competition and tight margins in the payments business.
An IPO will provide a quick answer to that question, as well as guidance for many of the other private start-up companies dubbed “unicorns,” meaning their valuation is $1 billion or more. CB Insights, a venture-capital tracker, says more than 130 such companies now exist.
Overall, the climate for venture-backed IPOs has weakened this year, with just 44 venture-backed companies listing on public markets in the first half of the year, according to the National Venture Capital Association. That compares with 66 in the first half of 2014.
Earlier this year, Square had filed for a “confidential” IPO, which lets companies with under $1 billion in annual revenue file registration documents and go through a Securities and Exchange Commission review without public scrutiny. After the review, if the company wishes to continue with an IPO, it makes a public filing.
Goldman Sachs will serve as lead underwriter, with Morgan Stanley and JPMorgan Chase also participating, Fortune reported.
Square’s IPO comes at a critical time for Chief Executive Officer Jack Dorsey, who is also interim CEO of Twitter Inc . Dorsey has not dismissed becoming permanent CEO of Twitter while staying at Square, but Twitter’s board has said that its next CEO needs to be solely focused on that company. (Additional reporting by Yasmeen Abutaleb in San Francisco; Editing by Meredith Mazzilli, Bernard Orr and David Gregorio)