FinTech: Stripe’s $115B Valuation Is “Nuts” But “Not Utterly Insane”
According to a Forbes report, the secondary market is valuing Stripe at $115 billion.
Stripe, the payments processing company that Irish brothers Patrick and John Collison founded in 2010, has tripled its valuation in the space of the last 10 months. A Forbes report said transactions in the secondary market of the private fintech giant’s shares now value it at $115 billion, more than 3X the $36 billion valuation it garnered in an April 2020 funding raise.
Striking when it’s hot
Quoting a source, Forbes also said Stripe was mulling a new funding round. The proposed funding would cement a valuation of over $100 billion.
In November, Bloomberg reported that the Collison brothers were contemplating a fundraise. The round would assign a sticker to Stripe in the range of $70 billion and $100 billion.
The recent activity in the secondary market in Stripe’s unlisted shares may be pointing to the impending raise and its gargantuan valuation.
Also at work is the massive tailwind that digital payments got from the pandemic. Lisa Ellis, a partner and senior analyst at investment research firm MoffettNathanson estimated to Forbes that Stripe processed $200 billion to $250 billion in transactions in 2019 and grew roughly 50% in 2020.
Ellis also reckons that Adyen NV (AMS: ADYEN), a Netherlands-based payments processor, is Stripe’s closest competitor and that the two firms, along with PayPal’s (NASDAQ: PYPL) Braintree unit together command a 10% share of the global payments pie.
Adyen is trading at a valuation of almost $67 billion. Its shares have shot up from EUR 742 at the beginning of 2020 to currently EUR 2201. That’s a nearly three-fold jump in slightly more than a year.
Too much, too fast
So, is Stripe over-reaching for a valuation north of $100 billion?
Perhaps, but it may be growing faster than Adyen, says Ellis, and counts Shopify (NYSE: SHOP) and Amazon (NASDAQ: AMZN) amongst its customers.
However, these sky-high valuations may be difficult to justify when, eventually, Stripe considers an IPO. According to Forbes, Stripe is rumored to be going public sometime in 2021.
The public markets can be ruthless. Recall that WeWork had to withdraw its IPO due to the unfathomable gap between its private valuation ($47 billion) and what investment bankers finally estimated ($20 billion).
Ellis on Stripe’s $115 billion sticker: “It’s nuts in the same way that all private valuations are nuts right now for anything in fintech.”
But given their competitive position, “It’s not utterly insane,” she added.
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