IPO Boutique Brief: When is Stripe going public?

The IPO market has been in hibernation mode for more than 15 months.

Big deals, little deals…it doesn’t matter.  IPO investors are just wanting a spot to put their money to work.

But truly, a healthy equity capital market means big deals make their way to the market.  In 2021, a year in which there were 328 IPOs from tier-one underwriting firms, 26 of those offerings were cash raises greater than $1bn. In 2020, there were 20 offerings of that size.

A big one that is waiting for its “window” to open is payment platform Stripe. The company saw its valuation sky-rocket in private markets during the last bull-run. The exact valuation figures for each funding round have not been disclosed publicly by the company, however, here are some of the reported valuations for Stripe during their funding rounds:

• In January 2016, Stripe raised $90 million in a funding round led by CapitalG, valuing the company at $9 billion.
• In November 2018, Stripe raised $245 million in a funding round led by General Catalyst, valuing the company at $20 billion.
• In April 2019, Stripe raised $250 million in a funding round led by Andreessen Horowitz, valuing the company at $35 billion.
• In September 2019, Stripe raised $250 million in a funding round led by Tiger Global Management, valuing the company at $36 billion.
• In August 2020, Stripe raised $600 million in a funding round led by Allianz X, valuing the company at $36 billion
• in January 2021, Stripe raised $600 million in a funding round led by Dragoneer Investment Group, valuing the company at $95 billion

The $95 billion valuation in 2021 was a record for the highest-ever valuation for a private company. 

Now in 2023, market conditions are much different.

The fintech company has reportedly approached investors about raising possibly $2 billion at a valuation of $55 billion to $60 billion. According to the Wall Street Journal, Stripe would not use the money toward operating expenses but rather to cover a large annual tax bill associated with employee stock units.

Given that Stripe has waited so long to go public, it will be interesting to see how the market views their “story” when they do eventually go to market. For example, a company of this maturity is now having to react to market conditions. The company announced a 14% cut of staff last November — around 1100 people. During the bull-run, you wouldn’t see cuts like this in a technology company prior to an IPO as they are ramping up growth.

Stripe is now in the position where they are at the mercy of the market in terms of valuation. They have reportedly “mulled” over an IPO to occur within the next 12 months. Their first mistake was missing the IPO window during the bull-run. Their second mistake “could” be how they get their company to market. Will it be through a traditional listing or go the direct listing route? Will they attempt to “defend” a valuation at the expense of new investors?

When the IPO market is in hibernation mode and a company is against the clock, difficult decisions have to be made. But these should be made with a longer time horizon in mind.

Stripe is not the only tech company that is answering these questions in the C-Suite. But in 2023 they will be one of the larger, high-profile companies that investors are keeping tabs on.