What Will Stripe's Valuation Be at the IPO?

If you're up to date with the IPO valuation market, you already know that Stripe may go public sometime soon. This raises the question: What would Stripe's valuation be at the IPO?  

As one of the biggest industries in the online payment business, Stripe's multi-billion-dollar valuation is on par for the course. 

In March 2021, its estimated valuation was $95 billion, nearly triple its previous valuation in April 2020. As of 2022, however, Stripe slashed its internal share price by almost 30%, bringing it to $74 billion only. 

Despite the massive drop in value, it's still considered to be one of the biggest IPOs in the US. This article discusses everything you need to know about the Stripe IPO valuation, including its worth, IPO date, and how to invest in the IPO once it goes public.

Brief Overview of Stripe's Financial Growth 

Launched in 2009 by Irish-born programming brothers John and Patrick Collison, the beta version of Stripe aimed to provide solutions to the outdated legacy systems of banks and the online services of that time. 

The Collison brothers sold a software-as-a-service (SAAS) business for $5 million in 2008, giving them enough funds to develop the Company. They received an extra $2 million from Y Combinator and the PayPal founders Peter Thiel and Elon Musk in 2010 and 2011. 

Upon its official release from its beta in 2011, Stripe faced near-instant success. In just a year, the Company raised $18 million in its Series A with the help of Sequoia Capital, allowing it to expand outside the US. A few months later, $20 million was secured with Series B.  

By 2014, Series C of $80 million was finalised, which brought the Company's expansion beyond the 12 countries it operated in. 

In the following years, the Company secured $100 million, $150 million, and $245 million in 2015, 2016, and 2018 respectively. The Company would raise an additional $950 million in 2019 and 2020 alone. By 2021, the Company raised a total of $600 million. 

When Is Stripe's IPO Date?

At the time of writing, Stripe has yet to announce an official IPO date. 

The Collison brothers discussed their intentions with the Securities and Exchange Commission (SEC) in July 2021 and expected to go public "sometime soon." 

However, the exact date is anyone's guess.

What Will Stripe's Valuation Be at the IPO?

Stripe has had a number of fundraising rounds in the past decade, with the first occurring in August 2010 and the most recent in March 2021.  

In the 2021 listing, Stripe raised around $600 million from several companies, including Allianz X and Fidelity as well as Sequoia Capital. The $600 million funding round brought Stripe's pre-money valuation to $94.4 billion. 

Time wasn't kind to Stripe, however. Along with the Collison brothers' personal fortune, Stripe's valuation has gone down to $74 billion from $95 billion. 

According to Bloomberg, this massive drop in valuation is caused by the record-high inflation in the US. Inflation has severely affected the net worth of tech billionaires, making 2022—and possibly 2023—one of the worst times for an IPO debut. 

What Is Stripe's Current Status In the Market? 

Though slashed by 28%, Stripe remains to be one of the most anticipated listings in a while due to its staggering valuation of $74 billion. 

Stripe is among the few companies that actually benefited from the COVID-19 pandemic, with thousands of businesses turning to the Company to fill their unexpected need to invest in online payment functions. 

Stripe's payment platform is as solid as any payment platform can get. It offers fraud prevention, revenue management apps, and cloud-based infrastructure. On top of that, it features BNPL (buy now, pay later) services, which few payment platforms can feasibly offer. 

With an influx of online payments, it only makes sense that Stripe is rapidly growing its customer base. In 2021 alone, over 1,400 companies joined Stripe, and over 100 clients surpassed the million-dollar mark in total sales. 

There's also the fact that the Company is attracting clients and soon-to-be investors from all over the globe. In a single year, Stripe's customers in the Asia-Pacific region doubled, and customers from Latin America grew fivefold. 

On paper, Stripe's future is bright. Its annual revenue grew almost 400% compared to its $1.5 billion revenue in 2018, making it one of the fastest-growing industries to date. It's for this reason that investors are lining up to invest through a pre-IPO secondary market.

What Are the Advantages and Disadvantages of Investing With Stripe?

If you're planning to invest in the Stripe IPO, it's worth taking note of its advantages and disadvantages in the market. Here are the pros and cons of investing with Stripe: 

Reasons to Invest In Stripe IPO 

Booming Payment Industry 

The COVID-19 pandemic has irreversibly changed the way people do business. The online payment industry has seen growth never seen before, with transactions switching from manual to digital to save time. 

The market has plenty of room for growth, and Stripe is taking full advantage. 

Continuous Improvement 

In 2022, Stripe raised roughly $2.2 billion from over 40 investors. This gave the Company enough cash to improve the business and pursue investment opportunities. 

Stripe has already put much effort into improving its products and capabilities. New investments and improvements include: 

● Stripe Tax to manage value-added sales and taxes 

● Automation of revenue recognition

● Payment links for start-up clients 

● Stripe Radar to block third-party attacks 

● Address Element function to reduce processing errors and speed up the checkout process

Diverse Product Line 

Unlike other payment platforms, Stripe doesn't only offer payment processing. It also offers a range of services to attract as many customers as possible. 

By diversifying its product line, the Company opens its arms to an array of business opportunities to increase its growth. This makes it a good candidate for long-term investment. 

Default Payment System for Most People 

Stripe is among the most valued start-ups in the world. Currently, over 3.5 million active websites use Stripe. That figure only continues to grow as more and more businesses transition online. 

Reasons to Not Invest In Stripe IPO 

Dependency to Shopify 

Most of Stripe's business is generated through Shopify. If Shopify goes down, Stripe might be in trouble. The Company's dependence on a single entity could be seen as problematic in the future.

Enormous Valuation Might Be Its Downfall 

The Company's high valuation might deter some investors as it could fall during its debut in the stock market. Stripe must prove that it can grow post-IPO, as seen with other public companies. 

If it doesn't grow past its recent valuation, investors wouldn't see any value in investing in the Company. The fact that it was devalued from $95 billion to $74 billion in less than a year makes it difficult to go all-out with the Company. 

Aftermarket IPO Volatility 

IPOs are highly volatile in the first few months of going public. If you're interested in investing in Stripe, you should have a relatively high-risk tolerance. You may need to wait until you can evaluate at least two full quarters of earnings before committing to Stripe. 

Limited Global Access

Though Stripe is growing worldwide, it has limited global access when compared to one of its biggest rivals, PayPal. 

Granted, PayPal has been around for much longer than Stripe, so comparing the reach of both might be a bit unfair. 

Stripe has more than proven its worth in the US and the other countries it's operating in, so it's only a matter of time before the Company expands into more markets worldwide. 

How to Invest In the Stripe IPO 

Stripe hasn't gone public yet, so its shares are still held privately. Once it's publicly listed, you'll be able to buy shares during the stock market open hours just as you would with any other company. 

Stripe is believed to go public in 2023, giving you more than enough time to analyse the Company's financial history, such as market performance, growth metrics, market cap and valuation, and others. 

Stripe's financial statements aren't available for public access, but once it does, Stripe will publicise its quarterly financial statements to give future investors an insight into the Company's cash flow. With such access, experts will be able to discuss the Company's financial risks to help you with your decision. 

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Can You Invest In Stripe Pre-IPO? 

Though there's never a guarantee that you'll be able to acquire shares, in fact it is very unlikely, there are several ways to buy shares in a privately held company before the IPO. You'll need to keep track of the available investments or work with an advisor to invest in Stripe's pre-IPO. 

When investing in Stripe pre-IPO, make sure the Company you're using is legitimate. Pre-IPO investment is highly susceptible to fraud, making it extremely risky. Furthermore, there's no guarantee that you'll be able to acquire shares. 

It's always best to wait until after the IPO and buy it through a regular broker to keep you safe from fraudulent activity. You likely won't get it at the same low price as the pre-IPO, but that doesn't mean you won't make a profit. 

Who Are Stripe's Competitors? 

Two of Stripe's main competitors are PayPal and Square. PayPal's IPO was valued at $1.5 billion in 2002 and exponentially grew to $360 billion by 2021. 

PayPal is much more established than Stripe, and its long-standing lead in the market makes it a near-undefeatable foe. However, Stripe's innovative range of features put PayPal a run for its money. If Stripe goes global, overtaking PayPal is only a matter of time.

As for Square, it has an estimated IPO valuation of around $120 billion in 2021. Stripe specialises in internet payments, whereas Square is known for its mobile payment processing.  

Wrap Up 

According to recent reports, Stripe's valuation fell from $95 billion in 2021 to $74 billion in 2022. The Company has yet to reveal an official IPO date, but experts conclude that it might go public sometime in 2023. 

The information in this article is well-researched and factual. Still, it contains opinions also, and IT IS NOT FINANCIAL ADVICE and should not be interpreted as such, do not make any financial decisions based on the information in this article; we are not financial advisors. We are journalists. You should always consult with a professional before making any investment decisions.