As the market began to recover from the COVID-led decline last spring, the market grew ripe for a new batch of public companies. Investors were eager to get a piece of newly-public companies like Palantir, Bumble and Roblox, and their appetite is showing no signs of fading. Next on the list could be Stripe Inc., the payment processing firm that began as a small startup in Ireland. Today, Stripe serves millions of businesses through its API software that makes accepting and sending online payments a breeze.
Companies that reduce friction in the payment processing space like Square and PayPal have seen incredible success since becoming public entities. Could Stripe be the next to follow in their footsteps?
When is the Stripe IPO Date?
No date has been set for the Stripe IPO, but anticipation is brewing for shares to become available. A recent valuation reported in Bloomberg put the company $36 billion, a stunning number for a firm that’s barely more than a decade old. Further valuations have been even higher, approaching or even exceeding $100 billion.
When Stripe does move forward with an IPO, it remains to be seen whether it uses a direct listing or Special Purpose Acquisition Company (SPAC) to enter the public markets. SPACs have become an undeniably popular way to move private firms into the public sphere because they’re faster and cheaper than traditional listings. However, with a $36 billion valuation as of October 2020, Stripe likely won’t have trouble affording the underwriters.
Stripe may also choose a direct listing, shirking the traditional IPO, because it doesn’t need to raise money. Currently, the firm is using private tender offers to allow certain investors and employees to cash out, turning their holdings into liquid assets. However, the firm. is merely setting the stage for a listing that allows it to enter the public sphere, allow anyone to buy in and increase its value.
Moreover, the firm can use that cash to further grow, expanding faster than it is right now. Because an IPO date is not yet set, investors must wait until Stripe makes a further announcement, but into a private equity tender or wait until a Stripe IPO settles down after its release.
Stripe Financial History
Stripe began in 2010 with Irish brothers John and Patrick Collison. Frustrated with how difficult it was to pay for items through online businesses, the two young entrepreneurs began working on the prototype that would become Stripe. The goal was to create a user-friendly application that could enable more business to be done on the internet.
By 2011, it was obvious the brothers were on to something majorly successful and others began to take notice. Elon Musk and Peter Thiel, who teamed up to form PayPal, gave the startup $2 million in seed money in early 2011. Andreessen Horowitz and Sequoia Capital soon followed with investments and Stripe was off and running.
To date, Stripe has done an impressive 14 funding rounds, raising more than $1.6 billion in cash. In addition to Andreessen Horowitz and Sequoia, notable firms like Tiger Global Management and DST Global have participated in the funding rounds. The company is now headquartered in San Francisco and employs more than 2,500 full-time employees. While a private valuation of $36 billion was made last October, the company would likely be worth double that on the public market.
Stripe Potential
Stripe has the potential to be one of the most successful IPOs of 2021. While competitors like PayPal and Square have established themselves, Stripe users rave about the simplicity and ease with which they can navigate the platform. Some of the world’s biggest and most successful companies count themselves as Stripe clients, including Amazon, Microsoft, Uber, Google, Salesforce, Shopify and Nasdaq. In addition to their mission of painless online payments, Stripe also offers other business solutions like anti-fraud protection, credit card issuance and financing options.
Stripe has the chance to be a $100 billion unicorn. While even the most promising tech IPOs can stumble out of the gate, Stripe helps with the one key thing that all online businesses crave — reducing friction at the point of sale. With a strong customer base, array of products and plenty of market share still up for grabs, Stripe has a case for the strongest IPO buy of the year.
How to Buy Stripe IPO Stock
Buying shares of an IPO isn’t like purchasing them on an exchange. You’ll need to jump through a few extra hoops if you want to acquire shares before they hit the open market. Remember, however, that IPOs and private equity tenders tend to be priced higher than a common stock because of investor anticipation and market sentiment. Here’s how to proceed when you are ready to invest in a potential Stripe IPO.
- Pick a brokerage.
You’ll need to find a broker that can get you shares of an IPO before trading begins. One of the downsides of using discount online brokers is they often lack access to these types of new issues (looking at you, Robinhood and Webull). So you’ll need a broker that not only fits your trading goals and style, but one that can get the shares you’re looking for. Some brokers have a minimum purchase amount in order to get shares directly from the company — be sure you have enough capital to make a buy.
- Decide how many shares you want.
IPO share prices usually leak out ahead of time, so even if you’re buying shares on the open market, you’ll get a heads-up on the amount you’ll need to buy the stock. New issues can be extremely volatile, so don’t purchase more shares than you feel comfortable with. If you want to get in before the shares hit the exchanges, you’ll have to make a mandatory minimum investment, which can vary from broker to broker.
- Choose your order type.
If you get your shares directly from Stripe before they reach the open market, you won’t need to worry about order types. But if you’re buying from an exchange, you’ll need to decide whether you want a limit order to lock in a specific price or a market order to quickly get the shares in your account. Market orders are prone to slippage when stocks are volatile, meaning the price you see isn’t always the price you get. Be cautious when using market orders with new issues.
- Execute your trade.
Once your order is ready, place it and execute your trade. If you pre-order shares before the IPO date, you’ll have them deposited into your account from the broker before the stock goes live. But if you’re unable to procure shares ahead of time, you’ll need to find a good entry point before executing your trade. Keep your profit and loss targets in mind when searching for a spot to open a position.
Best Online Brokers
Below is a list of best brokers for your consideration.
Try Equitybee
Equitybee is an online investing platform that allows accredited investors to access startups by helping fund employee stock options. Often, employees at pre-IPO companies don’t have the funds to exercise those stock options, but Equitybee helps on both sides of the process. It works like this:
- The investor wires the initial investment amount plus the 5% fee
- As mentioned, the employee agrees to pay 30% of the future value of the shares and x% in annual interest to the investors
- The company takes an undetermined amount of time (let’s say 3 years) from the time the investor funds the options to the time it IPOs at [whatever the IPO price is]
- After a successful IPO, the employee receives the proceeds of the stock option [the number of shares multiplied by the stock price.] As a result of their funding agreement, the employee wires the investor their original investment amount plus 3 years of interest. Additionally, the employee has agreed to pay 30% of the total they earned from the IPO.
- After the employee wires 30% of the total proceeds and interest to the investor, the investor pays a 5% fee to Equitybee
- Keep in mind that this is a taxable event for the employee and the investor. It’s wise to consult with a tax professional to seek further assistance.
With a system like this, investors can access pre-IPO companies and gauge their performance without making a huge bet on the day of the IPO.
Stripe Could be a Big Winner in the Payment Processing Space
Stripe isn’t the first company to offer online payment processing for businesses but they might be the first to do it so well. Not only does Stripe streamline the process of buying and selling online, but they now offer a whole host of solutions and services to businesses of all shapes and sizes. While giant clients like Amazon and Microsoft have helped Stripe gain the reputation as a force in the industry, the most promising aspect of the company’s future could be the potential it offers new businesses looking to establish their online footprint.
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About Dan Schmidt
Dan Schmidt is a finance writer passionate about helping readers understand how assets and markets work. He has over six years of writing experience, focused on stocks. His work has been published by Vanguard, Capital One, PenFed Credit Union, MarketBeat, and Fora Financial. Dan lives in Bucks County, PA with his wife and enjoys summers at Citizens Bank Park cheering on the Phillies.