Stripe to Decide on Going Public Within One Year

Stripe Inc., one of the most valuable startups in Silicon Valley, is moving closer to what could be one of the biggest public-market debuts in recent memory. The company is reportedly in talks with investment banks about going public, and is said to be aiming for a valuation of around $20 billion. If it succeeds in going public at that valuation, it would be one of the largest IPOs in recent years.

Stripe co-founders Patrick and John Collison told employees Thursday that they are aiming to take the company public or allow employees to sell shares in a private-market transaction within the next 12 months, according to people familiar with the matter.

Stripe has hired Goldman Sachs Group Inc. and JPMorgan Chase & Co. to advise it on both options, the people said.

A payments processor that serves internet companies such as Shopify Inc. and Instacart Inc., Stripe is seen by investors as a sort of index for all of Silicon Valley. Its last fundraising round, nearly two years ago, valued the company at $95 billion.

Stripe's stock-market listing could help revive the initial public offering (IPO) market, which has been dormant since 2022. This would provide a much-needed boost to the economy and could help create jobs and spur innovation.

A bellwether of 2010s-era startups that grew into giant technology companies, Stripe long preferred to stay private and disclose few details to outsiders about its performance. That created pent-up demand over the years for investors who clamored to own a piece of Stripe but didn’t have a chance.

Stripe is a prime example of a startup that grew into a giant tech company. For years, they preferred to stay private and disclose few details to outsiders. This created pent-up demand from investors who wanted to own a piece of the company but didn't have a chance.

Rising interest rates, soaring inflation and fears of a recession have all contributed to a broad selloff in tech stocks, especially those of newly public companies. This has prompted many startups to shelve their plans to go public. Traditional IPOs in the U.S. have raised just $8.6 billion in 2022, which is less than any other year in at least two decades, according to Dealogic.

Although it doesn't need to raise additional capital, Stripe is likely to pursue a direct listing instead of a traditional IPO, according to sources.

A direct listing is when a company places existing shares on a public exchange and lets the market determine the price. With a traditional IPO, the company chooses the price of the shares and who gets to buy them. With a direct listing, employees or other early investors typically sell the stock.

Stripe is one of many 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 employees motivated. This often means giving them the opportunity to sell their shares.

Instacart, a grocery delivery app, offered its first-ever companywide cash bonuses and said it would find additional ways for employees to get value after pulling its public listing in October, The Wall Street Journal reported.

A boom in e-commerce, fueled by the pandemic, has turbocharged Stripe's business. According to the Journal, Stripe's annual revenue increased by nearly 70% in 2020, to about $7.4 billion. In March 2021, a fundraising round valued Stripe at $95 billion, making it one of the world's most valuable startups.

Last year was more challenging for retailers. Consumers returned to in-store shopping and changed their spending patterns in the face of high inflation. This made it difficult for retailers to adjust their prices and promotions to meet consumer demand.

In November, Stripe laid off 14% of its workforce. The Collison brothers admitted that the company had overestimated the near-term prospects of the internet economy and allowed undisciplined expense growth. Shares in Stripe's competitors, Adyen NV and PayPal Holdings Inc., are down about 50% and 75% from their 2021 peaks, respectively.

Last July, Stripe cut the internal share price used to price stock options given to employees from $40 to $29, lowering the implied value of the company to $74 billion, according to the Journal. The company recently cut the value of those shares again to $25, giving it an implied valuation of $63 billion, according to people familiar with the matter.

Stripe is hoping that 2023 will be a more auspicious year. Earlier this month, the company announced that it was expanding its work with Amazon.com Inc. to process a significant portion of Amazon's total payments volume across businesses such as Prime, Audible and Amazon Pay in the U.S. and other markets.