Here’s why Square is down today while the stock market is rising

There are two factors weighing on the fintech giant’s stock price.

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This article was originally published on All figures quoted in US dollars unless otherwise stated.

What happened

The stock market is having a fairly strong day on Thursday after a multiday slump caused by renewed COVID-19 fears. At 10:20 a.m. ET, the S&P 500 index was higher by about 0.6%. However, not all stocks were having a good day. Fintech giant Square (NYSE: SQ) was a major underperformer, its shares having declined by about 3.5%.

So what

There are two likely explanations for Square's underperformance. First, it's worth noting that the tech sector is one of the worst performers of the day. The tech-heavy Nasdaq is hovering around the flatline. So some of the underperformance can be attributed to sector weakness.

Second, and most significantly, Square announced on Wednesday afternoon that it is changing the company's name to Block, effective Dec. 10. Once the change happens, the ticker symbol (SQ) will not change, and the seller business will retain the Square brand name.

Why is Square changing its name? The short answer is that it's because Square's offerings today are very different from the small business financial solutions on which the business was founded. Cash App and the TIDAL music platform are two examples. Block is intended to represent Square's vision for the future -- the company represents its different businesses as "building blocks," and is also making a reference to blockchain, which is a major focus of co-founder and CEO Jack Dorsey.

It's also worth noting that Square Crypto is changing its name to Spiral at the same time, a move designed to give the business its own unique identity within the company's ecosystem.

Now what

The name change comes just days after Dorsey decided to step down from Twitter (NYSE: TWTR) and focus exclusively on Square. And based on today's move, it doesn't seem investors know quite what to make of it. It remains to be seen how much Square's business focus will shift toward blockchain and other new efforts, but for now this appears to simply be a name change, like the one Google made when it became Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL)

This article was originally published on All figures quoted in US dollars unless otherwise stated.

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Matthew Frankel, CFP® owns shares of Square. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and has recommended Alphabet (A shares) and Square. The Motley Fool Australia has recommended Alphabet (A shares) and Alphabet (C shares). The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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