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Technology Stocks : Fintech

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From: Glenn Petersen7/16/2022 8:38:27 PM
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Stripe Cuts Internal Valuation by 28%

Payments processor was last valued by private investors at $95 billion

By Berber Jin and Peter Rudegeair
Wall Street Journal
Updated July 14, 2022 3:58 pm ET

Payments giant Stripe last valued by private investors at $95 billion, cut the internal value of its shares by 28%, people familiar with the matter said.

Stripe told employees in an email Friday that the internal share price was about $29, compared with $40 in the most previous internal valuation, known as a 409A valuation, the people said. The move lowered the implied valuation of those shares to $74 billion, according to one of the people, which is calculated separately from the stock owned by major shareholders.

San Francisco-based Stripe said in the email that the board approved the lower share price effective June 30, the people said. The payments processor to startups and fast-growing internet companies didn’t explain the decision to lower its internal valuation, the people said.

A prolonged market sell-off, in which big technology stocks experienced their biggest rout in more than a decade , has slowed the pace of private fundraising and pushed startups to slash costs and cut jobs. That’s a stark contrast from the fundraising environment last year, when a buoyant market helped at one point make Stripe the most valuable startup in the U.S.

The shares of publicly-traded fintech companies have plummeted in the past few months, making Stripe look overvalued. Payments processor PayPal Holdings Inc., which investors often compare to Stripe, has seen its stock decline by over 60% since Jan. 1.

In March 2021, Stripe raised $600 million from a group of investors that included Ireland’s National Treasury Management Agency and Fidelity Investments. Stripe was valued at $95 billion in that round, more than 2 1/2 times its valuation in a 2019 fundraising round.

A 409A valuation is an independent estimate of a startup’s fair market value, often used to price stock options to employees.

Private companies often update their 409A valuation to more appropriately assess the best price to issue new stock options. The metric is separate from the valuations investors assign to startup shares, which are usually based on the price of the last financing round but can change based on changes in a company’s performance or external market shifts.

Stripe isn’t the first high-profile startup to lower its 409A valuation. Earlier this year, Instacart Inc. marked down its internal valuation to $24 billion from $39 billion, a decision the company said it made to help with retention and recruiting by giving employees more potential upside with their options.

Stripe took off during the pandemic, as businesses migrated online and began using its software to process payments on their platforms.

Founded in 2010 by Irish brothers Patrick and John Collison, Stripe raised more than $1 billion since the start of the pandemic from Silicon Valley investors, including Sequoia Capital and Andreessen Horowitz. Amid the height of the venture capital boom last year, some investors sought to buy shares of the company at prices well north of its last $95 billion valuation.

The company has yet to mount what would be one of the most highly-anticipated public listings in the startup world. As of April last year, Stripe was preparing to go public as early as late 2021, The Wall Street Journal previously reported. A spokeswoman for the company declined to comment on its current IPO plans, though the market for tech listings h as largely frozen up amid the market rout.

Stripe processes payments for fellow startups and tech companies including skincare provider Glossier Inc., enterprise service Twilio Inc., and ride-hailing service Lyft Inc. Revenue rose nearly 70% to about $7.4 billion in 2020, The Wall Street Journal previously reported, as online shopping took off at the start of the pandemic. Investors liked Stripe because of the wide reach of its services among Silicon Valley startups, allowing the company to act as an index of sorts for the broader growth of the startup industry.

Fintech firms have been hit hard by rising inflation and fears of an impending recession, which could threaten to further reduce online consumer spending. Many public investors have sold off shares in payments firms like Adyen, whose stock is down over 40% since the beginning of the year.

The harsher environment is already hurting some high-profile fintech startups. Earlier this year, Swedish payments firm Klarna Bank AB, which offers a buy-now, pay-later service, raised new cash at a $6.7 billion valuation, down from the $45.6 billion valuation it raised at in June 2021.

Write to Berber Jin at berber.jin@wsj.com and Peter Rudegeair at Peter.Rudegeair@wsj.com

Appeared in the July 15, 2022, print edition as 'Stripe Cuts Valuation 28%'.

Stripe Cuts Internal Valuation by 28% - WSJ
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