The global digital payments company Stripe will decide if it goes public or not within the next 12 months according to a memo sent to employees yesterday, possibly to address concerns about soon-to-be-expired stock awards.
The Wall Street Journal was the first to report the company’s internal communications on this matter. Stripe has been dodging an initial public offering (IPO) for years and may now be forced to list its shares at a time when equity valuations have dropped sharply amid the hawkish actions taken by central banks across the world.
Stripe’s IPO is one of the most widely anticipated listings. The Ireland-based company was at some point valued at $95 billion before and during the pandemic when macroeconomic conditions were more favorable.
However, an increase in the benchmark interest rate of most central banks including the Federal Reserve has put pressure on the valuation of high-flying tech stocks. As a result, Stripe has reportedly trimmed its internal valuation to $74 billion first and then to $63 billion.
Stripe Needs to Find a Way to Let Employees Cash Out
In November last year, Stripe let go approximately 14% of its workforce – around 1,120 employees. The company’s Chief Executive Officer, Patrick Collison, cited a pandemic-led hiring spree and a challenging macro backdrop as the main cause for these layoffs.
Stripe has reportedly sought the advice of JP Morgan and Goldman Sachs for its public listing. The IPO market has dried up since late 2021 as geopolitical tensions and elevated inflationary pressures instilled fears among market participants that central banks could soon tighten their monetary policies.
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The digital payments platform is a direct competitor of the larger and publicly-listed PayPal (PYPL). In 2021, it reportedly produced revenues of $12 billion and positive EBITDA figures.
Stripe has probably managed to avoid official down-rounds mostly due to the $600 million it raised in March 2021 when venture capital firms including Fidelity, Sequoia Capital, and Allianz valued the payments solutions provider at $95 billion.
Aside from going public, Stripe could also opt to give employees whose stock awards are set to expire shortly the chance of selling their shares to venture capitalists who already own a stake in Stripe.
If no action is taken by the company, that would result in the loss of a significant portion of their compensation.
More Details About Stripe’s Beginnings, Finances, and Operations
Stripe was founded in 2010 by brothers Patrick and John Collison to radically change how the up-and-coming digital payments industry worked by offering vendors what they sought – lower intermediation costs and faster clearance times.
The Collison brothers managed to launch Stripe with the help of Y Combinator. Interestingly, Peter Thiel, one of the founders of PayPal, led the Series A funding round of Stripe and lured top VC firms including Andreessen Horowitz and Sequoia Capital.
In 2021, Stripe assisted businesses in processing payments worth over $640 billion. This represented a 60% increase compared to the previous year. During the year, the firm saw an average of 1,400 businesses joining its platform every day.
The platform supported over 50 payment methods in a total of 72 countries and has enrolled 50 customers considered “category leaders” who process over $1 billion in payments by using the company’s solutions.
Most research firms indicate that Stripe has a 20% market share or a figure close to that in the global digital payments market. PayPal remains the market leader with a 30% market share globally.
Meanwhile, research from Precedence indicated that the global digital payments market will be worth approximately $123 billion by the end of this year and could more than double its size by the end of 2028.
North America remains the most important market for Stripe although the firm has a solid presence in Europe.
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