Square CFO resignation seen adding uncertainty to story

Shares of payments company Square (SQ) dropped in pre-market trading after the company said its chief financial officer will step down to become the chief executive officer of another company. Following the news, analysts at two firms said they expect increased uncertainty to Square's story. CFO SARAH FRIAR STEPPING DOWN: On Wednesday, Square, which is run by Twitter (TWTR) CEO Jack Dorsey, announced that CFO Sarah Friar will step down in order to become the CEO of Nextdoor, a social network for neighborhoods founded in 2010. Nextdoor's current CEO, Nirav Tolia, announced plans to step down from his role after almost eight years. Dorsey tweeted, saying he is "proud" of Friar, who helped take Square public in 2015. In a memo to employees shared on Twitter, Dorsey said he is "saddened" by the news, adding that "I was unrealistically expecting to be working with Sarah well into our late 90s (swapping the standup tables for rocking chairs). Unrealistic because I knew of Sarah's lifelong ambition to run her own company." Dorsey said Square will search for a new CFO, with that effort being led by board member David Vinar and Roelof Botha. Dorsey also said Square will move Payroll, Customer Success and Business Platform Engineering to Seller, and will move Corporate Development to Counsel "until we hire our CFO." Friar will stay on as CFO into December to ensure a smooth transition, Dorsey said. RESIGNATION ADDS UNCERTAINTY: Mizuho analyst Thomas McCrohan lowered his price target for Square to $90 from $95 after the announcement that Friar will step down, telling investors in a research note that he sees increased uncertainty following the departure of the "well-respected" CFO. The analyst pointed out that he considered Friar as the "key instrumental force that built overall credibility with the investment community." Still, McCrohan believes Square's human capital advantage extends beyond a single person. BTIG analyst Mark Palmer said in a research note of his own that the surprise resignation of Friar adds uncertainty to Square's story that may further weigh on its valuation, as she had been viewed by many observers as serving in a role "more expansive and crucial than that of a typical CFO." Palmer said he continues to believe the stock is overvalued and that Square's increasing dependence on the extension of credit to its customers has made its business model "increasingly vulnerable" to volatility in the credit markets. PRICE ACTION: In pre-market trading, shares of Square are down about 10%.