[HN Gopher] Stripe cuts internal valuation by 28%
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Stripe cuts internal valuation by 28%
Author : nowherebeen
Score : 50 points
Date : 2022-07-14 16:25 UTC (6 hours ago)
(HTM) web link (www.wsj.com)
(TXT) w3m dump (www.wsj.com)
| paxys wrote:
| Should be cut by 50%+ to be in line with the rest of the tech
| market, and even more if you are valuing it as a FinTech company.
|
| SQ is down 75% since its November peak.
| TechBro8615 wrote:
| What is an internal valuation, and does Stripe actually lose
| anything from lowering it? My cynical experience suggests that
| companies usually have more to gain by lowering their valuation
| than they do by inflating it.
|
| Apologies if the article already described the possible negative
| impacts to Stripe caused by a decreased internal valuation. I'm
| unable to read it since it requires a subscription I cannot
| afford (due to inflation of course, nothing personal to the WSJ).
| bgirard wrote:
| If it's the same valuation used when making offers and
| refreshers then cutting it will hurt the company.
| sparker72678 wrote:
| Generally, "Internal valuation" is the valuation used by
| investors while the company is still private.
|
| One way it can affect Stripe is that it makes stock options
| less valuable to current employees, and can influence the
| weight those options have in persuading new hires.
| pbreit wrote:
| There are typically two valuations of private companies. The
| "internal valuation" is usually the valuation of the common
| shares (ie, those that are granted to employees) whereas the
| "external valuation" is the value of the "preferred" shares
| that investors purchase. The external/preferred valuation is
| usually higher because the preferred shares have more
| attractive terms (such as that you get your money back first
| before other equity holders are paid out).
|
| From the article: "A 409A valuation is an independent
| estimate of a startup's fair market value often used to price
| stock options to employees."
| TechBro8615 wrote:
| I know this is totally standard and everything, but imagine
| if we applied this to any other context:
|
| - The "internal" assessment of the bridge's strength, and
| the external assessment of the people who drive over it
|
| - In politics, you have a "public position" and a "private
| position"
|
| Makes you think!
| dasil003 wrote:
| It only makes the options less valuable if they are actually
| offering a liquidity event, otherwise it is actually
| advantageous to employees as any new option grants (both new
| hire and refreshers) are delineated in dollars, so a lower
| valuation means they get more of them.
|
| I get that this might not align with the perspective of their
| employees, especially if they skew young and their
| expectations were shaped by tech stock price dynamics of the
| 2010s. A lot of folks haven't yet come to terms with the new
| normal. From an ISO/RSU earning employee's perspective, it's
| better for prices to correct quickly and completely so you
| can start getting new grants at more reasonable valuation
| with real upside.
| nowherebeen wrote:
| That's about 74 billion valuation. FYI.
| gunapologist99 wrote:
| https://archive.ph/ZnoLY
| newaccount2021 wrote:
| rvz wrote:
| Oh dear. Not even Stripe is safe from the market downturn and
| they are cutting their valuation by 28% - from $98B to $74B.
|
| It's extremely early to write them off but perhaps they should
| have IPO'd in 2019. Since they didn't, they had to wait it out
| during 2020, 2021, etc. As long as they are profitable, then they
| will certainly survive this with ease.
|
| But overall, _no-one_ is safe from this and we will see how the
| market tests the weakest of companies that are not profitable and
| completely dependent on constantly raising money.
| itsryanirl wrote:
| This. Companies that IPOd in 2019 were lucky. So many
| organizations had to and are going to have to wait out covid,
| the looming recession, etc...
|
| The next few years will be interesting. I'm excited to see
| which domains are recession-proof. Something tells me
| enterprise software is going to be where the moola is made.
| asd88 wrote:
| $74B is still quite high for the current market
| toomuchtodo wrote:
| The current market _so far_. Interest rates will rise and CC
| transactions will migrate over time to less costly rails
| starting in the next 12-18 months (although Radar, Identity,
| and other value add products are likely to see continued use
| and rev growth). Imho, Stripe should 've IPO'd at the top ~12+_
| months ago.
|
| EDIT: @pbriet (HN throttling, can't reply directly to your
| comment)
|
| In the US, Zelle does $490B worth of volume annually (2021),
| all CC networks combined do about $1.9T (2021). That's
| significant volume for a real time payment system, and it's not
| even fully baked within the US financial ecosystem. FedNow [1]
| [2] [3] rails go live next year with instant settlement, moving
| up to $500k in value for 5 cents (what the bank partner charges
| the banking customer is up to them). I expect that to move the
| needle, considering merchants can charge a CC surcharge per
| SCOTUS' Expressions Hair Design v. Schneiderman (No. 15-1391)
| ruling. If you compare India's UPI implementation to CC volume,
| the open platform is fairly successful [4], hence my thesis
| (and this pattern is repeated, you'll find, across other
| economies where a low cost real time payment system is
| present).
|
| CC companies are raising their rates because their margin is
| soon to be compressed. Ignore BNPL, that's a feature/product
| masquerading as a business (see: Klarna's down round, Affirms'
| decline in share price, etc) and regulators are coming for it
| [5].
|
| TLDR A new fintech product from the Fed is likely to shift
| higher cost transactions from legacy payment rails to a utility
| product.
|
| [1] https://www.moderntreasury.com/learn/what-is-fednow
|
| [2] https://frbservices.org/financial-
| services/fednow/community/...
|
| [3] https://corpgov.law.harvard.edu/2020/08/31/fednow-the-
| federa...
|
| [4] https://www.business-standard.com/article/finance/upi-
| most-p...
|
| [5] https://www.pewtrusts.org/en/research-and-
| analysis/blogs/sta...
| pbreit wrote:
| "CC transactions will migrate over time to less costly rails
| starting in the next 12-18 months"
|
| People have been saying that for decades. And in fact the
| opposite is happening. Visa/MC raising rates. PayPal raising
| rates. Volume shifting to more expensive BNPL.
| toomuchtodo wrote:
| Timely thread:
| https://news.ycombinator.com/item?id=32100777 (UK lawmakers
| tell Visa and Mastercard to justify fee rises)
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