There is nothing more exciting in financial technology or fintech than payment providers. Those boring cashier business models were a great investment in companies like PayPal and Square, now valued at more than $ 100 billion each.
Stripe knocks on that door. On Sunday, the still-private online payments fintech firm announced that it had closed the latest round of funding, valued at $ 95 billion. That’s amazing growth – nearly triple the April 2020 round of funding, in which the company was valued at $ 36 billion.
This round makes the company the most valuable fintech startup and is currently worth more than eight times as much as the next valuable fintech robinhood.
But what does this mean for retail investors who can’t wait to buy? Strip shafts Initial public offering?
Who Owns Stripe Stock Now?
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According to CFO Dhivya Suryadevara, who previously held the same role at General Motors, the company didn’t necessarily need the funding round. After Suryadevara determined that the company was “highly capital efficient”, he described the eighth capital increase as “opportunistic”.
The differences among investors were also remarkable: The round in April 2020 was led by Silicon Valley VC heavyweights such as Andreessen Horowitz and Sequoia Capital.
These companies were noticeably absent from the press release of the current funding round, in which only funders such as Allianz Group, Axa SA, Baillie Gifford, Fidelity Management & Research Co., Sequoia Capital and the Irish National Treasury Management Agency participated.
When you reach out to fund-only lenders, the money pool expands, resulting in higher ratings. This supports Suryadevara’s claim that it is an opportunistic increase.
Is Stripe Stock Too Expensive?
Although Stripe shares a business model with PayPal and Square, the company’s take on funding was radically different. PayPal was valued at less than $ 1 billion when it went public in 2002, and Square was less than $ 3 billion when it debuted in 2015.
It was these lower market caps that allowed companies to become growth favorites. At $ 95 billion (likely more at the time of IPO), Stripe is likely to have a more difficult path ahead of it in the public equity markets.
Admittedly, Stripe’s performance in the public markets is determined by sales and growth path. Unfortunately, Stripe is under no obligation to release its financial data and is notoriously private with respect to that data. However, it seems the company is going to be an expensive stock.
Third-party estimates ranged from $ 450 million in 2019 to $ 3.4 billion last year, and lots of guesswork between those numbers. Even the cheapest estimate is well below Square’s sales ($ 9.5 billion), even though its market cap is only 14% below that of the public company.
Stripe Stock IPO: Two Theories
More importantly, this latest increase points in two ways. The first is that Stripe wanted to reset the valuation before arranging an IPO. This is like Robinhood shares recent action; The company made a convertible bond during an emergency round that marked its expected IPO price around $ 30 billion.
The second is that the company plans to stay private for a long time and saw an excellent opportunity to raise funds while the market was still receptive to oversized valuations. The fact that the company has chosen to invest in fund-only funds and their comments suggest that this course of action is not out of the question.
Either way, mom and pop investors appear to be losing future profits from Stripe stock as they are unlikely to get the same public stock performance as PayPal and Square.
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