Startup News: Stripe sets timetable for going public

Stripe, the Silicon Valley-based payment processor, has long been a bit of a tease for individual investors seeking to get in on one of the most valuable private companies in America – which was once valued as high as $95 billion in 2021.

Even during the IPO frenzy among tech startups, Stripe refrained from going public and shared little information with outsiders regarding financial performance. A sharp downturn in the market for tech stocks over the past year has only reinforced the desire for Stripe and other startup darlings to remain private until market conditions improved.

But an opportunity for outside accredited investors to get a sizable piece of Stripe may come, even without an IPO. The precipitating event is the expiration next year of restricted stock units or RSUs held by long-term employees of the 13-year-old company. Without action by the company, a major part of these employees’ compensation could disappear overnight, causing discontent and possible departures.

As a result, Stripe co-founders and brothers Patrick and John Collison told employees in January that executives have set a goal of either taking the company public through a direct listing of shares or allowing employees to sell shares in a private-market transaction within the next 12 months, according to reports in both The Wall Street Journal and tech news site The Information.

Stripe hired Goldman Sachs and JP Morgan Chase to advise it on both options, according to the publications.

For Stripe, a heightened concern for keeping employees happy and in the fold comes two months after the company slashed the workforce by 14% following a drop in revenues amid a global slowdown in tech-related services. And the company has cut its valuation twice over the past year to its current $63 billion as reported by The Information in January 2023.

Stripe’s last venture capital fundraise was in March 2021 when it engineered a $600 million funding round. The financing was led by several leading financial services companies including insurers Allianz and Axa, Fidelity Management & Research, and Sequoia Capital.

These venture capitalists have seen the potential promise of a company that provides payment processing used by leading companies such as Amazon, Google, Shopify, Instacart, Zoom, Lyft, and many others. Aside from payment processing, Stripe offers ecommerce APIs or application programming interfaces that allow multiple systems and databases to communicate seamlessly. Other products include an in-store point-of-sale solution, subscription-based payments, invoicing, card issuing and lending services, as well as risk and fraud management.

As The Wall Street Journal writes, Stripe is among an older generation of Silicon Valley startups that are facing pressure to give employees the chance to sell their shares.

“Many private companies that decided not to mount public listings last year were forced to find new ways to keep long-term employees motivated,” wrote the Journal in January. For example, after delaying its public listing in October, grocery delivery app Instacart offered its first-ever company wide cash bonuses.

As it turns out, the pressing need for Stripe to take care of its veteran employees could redound to the benefit of outside investors.

About the Author

John Kimelman is a veteran journalist who has worked at Barron’s and CNBC covering such topics as investing and commercial banking. Mr. Kimelman has received compensation from Forge Global, Inc. for authoring this article. Read more from John.

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