Feb 29, 2024 - Business

Payments giant Stripe may never go public

Illustration of a light bulb behind a fence

Illustration: Natalie Peeples/Axios

All VC-backed startups someday will seek to go public or be acquired. That's the tacit bargain made when taking money from investors who have their own investors.

  • But what if they don't?

Driving the news: Stripe, the 15-year-old payments giant, yesterday announced a new employee tender offer at a $65 billion valuation.

  • It's larger than $1 billion, albeit smaller than last year's $6.5 billion tender offer, around half of which was used to fund tax obligations for both the company and employees.
  • Most of the windfall came from outside investors, including longtime backer Sequoia Capital, although Stripe also contributed from its own coffers. The company became cash-flow positive last year, and a source says it should remain that way for calendar 2024.

The big picture: Stripe had told employees to expect annual opportunities to sell shares, but many believed this year's mechanism would be an IPO. Yesterday changed that.

Zoom in: The company's internal messaging has long been that it will eventually go public, with the public messaging caveat that it's in no rush to do so.

  • Maybe that's still the plan. Stripe has been significantly expanding its non-payments offerings, basically expanding into a broader enterprise SaaS platform, but isn't yet to the point where it can escape being compared to payment rivals whose shares have been either flat or down over the past year.
  • But it's beginning to feel like the company's "no rush" mantra is synonymous with "no interest." Kind of like SpaceX, but without the Starlink spinout talk.
  • And it doesn't hurt that Sequoia's Mike Moritz, long an aggressive advocate for exit optionality, left Stripe's board last November.

Look ahead: Stripe has removed the employee liquidity pressure via employee tenders, but at some point will need to cash out its VCs.

  • One possibility is that it could seek a massive secondary. Not the type that venture funds, even large ones, could do. Instead, I'm thinking deep pockets like Berkshire Hathaway or Saudi Public Investment Fund.
  • The buyer wouldn't get control, but would get hearty dividends and the right to sell to third parties in the future.
  • Stripe would get a simplified cap table, a wealthy cornerstone investor, and the peace of remaining private.

The bottom line: Precious few VC-backed companies have the luxury of contemplating life as a never-public. Stripe is one of them.

Go deeper