Forget Robinhood, Stripe Stock Is the Most Valuable Fintech

In the financial technology, or fintech, industry, there’s nothing more exciting than payment providers. These boring cashiering business models have been great investments with companies like PayPal and Square now valued at more than $100 billion each. 

Stripe is knocking on that door. On Sunday, the still-private online payment fintech company announced it closed on the newest round of funding that values the company at $95 billion. That’s amazing growth — nearly triple the April 2020 funding round that valued the company at $36 billion.

This round makes the company the most valuable fintech startup and is currently worth more than eight times the value of the next valuable fintech Robinhood. 

However, what does this mean for retail investors that can’t wait to buy Stripe stock’s IPO?

Who Owns Stripe Stock Now?

According to CFO Dhivya Suryadevara, who formerly held the same role at General Motors, the company did not necessarily need the funding round. After noting the company was “highly capital efficient,” Suryadevara characterized the eighth capital raise as “opportunistic.”

Also noteworthy were the differences in investors: the April 2020 round was led by Silicon Valley VC heavyweights like Andreessen Horowitz and Sequoia Capital. 

These firms were conspicuously absent from the current funding round’s press release with financial-only backers like Allianz Group, Axa SA, Baillie Gifford, Fidelity Management & Research Co., Sequoia Capital, and Ireland’s National Treasury Management Agency participating. 

Going to pure-financial backers widens the pool of money, which leads to higher valuations. This supports Suryadevara’s claim of it being an opportunistic raise.  

Is Stripe Stock Too Expensive?

Although Stripe shares a business model with PayPal and Square, the company’s take on funding has been radically different. PayPal was valued at less than $1 billion at the time of its 2002 IPO and Square was valued at less than $3 billion at its 2015 debut. 

It was those lower market capitalizations that have allowed the companies to become growth stock favorites. At $95 billion (likely more by the time of the IPO), Stripe will likely have a more difficult path ahead in the public stock markets.

Admittedly, Stripe’s performance in the public markets will be driven by revenue and growth trajectory. Unfortunately, Stripe is under no obligation to release its financials and is notoriously private about this data. However, it does appear the company will be an expensive stock.

Third-party estimates have ranged as wide as $450 million in 2019 to as high as $3.4 billion last year and many guesses between these figures. Even the most-favorable estimate is significantly lower than Square’s top-line ($9.5 billion) despite having a market cap only 14% lower than the public company. 

Stripe Stock IPO: Two Theories

More importantly, this recent raise points to two paths ahead. The first is Stripe wanted to reset the valuation before arranging an IPO. This is like Robinhood stock’s recent action; the company did a convertible note during an emergency round that put a $30 billion marker on the expected IPO price.

The second is the company is planning to remain private for a long time and saw an excellent opportunity to raise funds while the market was still receptive to outsized valuations. The fact the company chose to invest with purely financial backers and their comments suggest this course of action isn’t out of the question.

Either way, it seems like mom-and-pop investors lose out on future gains from Stripe stock as it will likely not have the same public stock performance as PayPal and Square. 

The next blockbuster IPO?

2021 could be one of the biggest years for IPOs in stock market history. Yet, with just a small fraction of IPOs historically driving nearly all the profits, who will you trust to uncover the most innovative and high-upside IPOs in the coming months?

There’s a company that “called” these businesses long before they hit it big. They first recommended Netflix in 2004 at $1.85 per share, Amazon in 2002 at $15.31 per share, and Apple back in the iPod Shuffle era at $4.97 per share. Take a look where they are now.

That company: The Motley Fool.

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