Another Oversubscribed Business Funding Round for Stripe
The Wall Street Journal report notes the tender offer was conducted at a price similar to when Stripe offered shares in the private market in March. Following this business funding round three months ago, the fintech startup has become the highest-valued private company in Silicon Valley, with a business valuation of $95 billion.
Stripe has attracted funding from major business investors thanks to the online shopping frenzy fueled by the COVID-19 pandemic. The fintech startup has been laying the groundwork for an initial public offering (IPO) that could launch later this year or in early 2022, according to The Wall Street Journal.
Startup business investors have preferred tender offers recently as it allows them to accumulate larger holdings beyond traditional fundraisings. For instance, Japanese investing company SoftBank bought almost $7 billion of Uber’s shares during a tender offer in 2017 when the ride-hailing business giant was still a private company.
The majority of bigger business investors involved in Stripe’s offer raised existing stakes. Shopify has injected over $350 million in Stripe via multiple transactions. Shopify is also among Stripe’s largest payment-processing business clients, and the ecommerce titan has launched bank accounts and debit cards through Stripe.
At Stripe, as is the case with many other startup companies, stock options are set to expire 10 years from the date they are granted. As such, employees who joined the company when it was founded in 2010 were concerned that their options would expire before the company’s IPO.
The fintech startup has failed to arrange private transactions that would allow employees to sell shares. For those it did arrange, the former employees were largely restricted from selling, according to The Wall Street Journal.
The report adds that those limitations were lifted for Stripe’s new funding offer. Still, not every employee was allowed to participate in the latest funding offering.
Stripe has previously shifted its stock-based compensation plans to restricted stock units that don’t vest until a public listing. In this setting, only shares that have vested could be tendered in the offer, which automatically excludes the majority of recent employees.
Separately, Stripe has also launched a new solution to help businesses calculate and collect sales tax more easily. The new product, named “Stripe Tax,” is designed to automate the computing and collection of sales tax, value-added tax, as well as goods and services tax for transactions conducted via Stripe’s platform.
Stripe’s EMEA head Matt Henderson pointed out how calculating the amount of sales tax that has to be paid on some transactions can be a complicated process.
“There’s a lot of different variables that go into determining what’s the right rate and when is it due for collection and payment. In Germany, for example, a pet rabbit is 19% VAT and a pet guinea pig is 7% VAT, whereas in the U.K. or Ireland you wouldn’t make a distinction on such things,” he said.
Fintech startup company Stripe secured roughly $1 billion in new funding led by Capital Group, Sequoia Capital, ecommerce giant Shopify, and tech investment business Silver Lake.
About the Author
Luigi Wewege is the Senior Vice President, and Head of Private Banking at Caye International Bank. Outside of the bank, he serves as an Instructor at the FinTech School which provides online training courses on the latest technological and innovation developments within the financial services industry. Luigi is also the published author of: The Digital Banking Revolution.