Commercial banks still have a tremendous hold on the US economy, but fintech companies are making inroads at a rapid rate. Disruptive innovation has transformed many aspects of the industry, pulling market share in lending, deposit accounts, and brokerage services away from the big banks.
In 2021, a number of fintech startups made their debut on the trading floor. Examples include:
- Affirm – Offers “buy now, pay later” credit services for consumers and began trading on January 13, 2021
- Billtrust – This payment cycle management platform began trading through a SPAC merger on January 13, 2021
- Blend – Offers digital lending services with streamlined applications for consumer loans, mortgages, and deposit accounts – it began trading on July 16, 2021
- Coinbase – A leading provider of digital currency-related services – began trading on April 14, 2021
- NerdWallet – Offers consumers detailed information and support in selecting the right mortgage or credit card – the first day of trading occurred November 4, 2021
- Remitly – A digital money transfer company began trading on September 23, 2021
- Robinhood – An online brokerage firm that became enormously popular with new traders went public on July 29, 2021
- SoFi – A new sort of banking concept that offers all traditional financial services online – began trading through a SPAC merger on June 1, 2021
In the midst of so much fintech activity, one name is noticeably absent: Stripe. It’s one of the largest providers of digital payment solutions in the world, serving millions of companies, but it doesn’t appear on any public exchange.
Investors are anxious to be a part of Stripe’s runaway success, so that brings up an important question. How to buy Stripe stock when its shares aren’t listed?
Stripe 101
E-commerce sales haven’t overtaken brick-and-mortar stores yet, but they are well on their way. Even before lockdowns, more people were shopping online, and the pandemic amplified e-commerce growth exponentially.
In 2020, e-commerce captured nearly 20 percent of the US market – an increase of more than 32 percent year-over-year. That figure represents a total of $791.70 billion in spending.
Stripe Has Tier One Client List
Every dollar in online spending must go through a digital payment processor, and Stripe is a leading provider of digital payment tools. There are millions of businesses ranging from sole proprietorships and startups to Fortune 500 companies that rely on the Stripe platform to process their transactions.
Some of Stripe’s more notable clients include Amazon, Salesforce, Google, Lyft, Shopify, and Zoom. With the help of Stripe’s comprehensive suite of digital payment solutions, these businesses can send and receive cash electronically to customers in dozens of countries.
Stripe Has Best In Class Security
Unlike many of its less-sophisticated competitors, Stripe has state-of-the-art fraud prevention and security features. For example, the software is capable of verifying account balances before transactions are completed to prevent the equivalent of chargebacks or bounced checks.
Payment processing fees are the main driver of Stripe’s revenue, and at approximately 3 percent, the company sees impressive top-line results. Though no one outside the company is sure of the exact numbers, 2020’s payment volume is estimated at $350 billion. That’s roughly 15.5 percent of total payment processing market share.
Stripe doesn’t file detailed financial reports, so information is limited, but it appears Stripe generated $7.4 billion in revenue for 2020. In 2018, that figure was just $1.5 billion, which means Stripe grew its revenue by an astonishing 393 percent in two years.
Is Stripe Better Than PayPal?
A variety of companies operate in the digital payments space. Some are well-known, like Square (SQ), while others are more obscure. However, most industry experts consider PayPal (PYPL) to be Stripe’s biggest competitor. Each has features that appeal to a particular audience, and market share will ultimately come down to which can attract the most clients.
Stripe is intended for developers who wish to add customized payment solutions to their existing platform. Small business owners without tech expertise often remark that Stripe is a bit too complex to be practical. PayPal, on the other hand, doesn’t offer a high level of customization, but it can be integrated into e-commerce platforms with what amounts to copying and pasting.
Stripe is best for businesses that make extensive international transactions. It accepts more than 135 unique currencies. PayPal is limited to approximately two dozen currencies, which can be problematic for some companies.
Finally, on a per-transaction basis, PayPal tends to be more expensive than Stripe. Small businesses often find that the question of whether Stripe is better than PayPal comes down to cost vs. complexity. Those that can manage through Stripe’s complexity typically go that route, while those that remain are willing to pay a bit more for the less-customizable, less-complicated PayPal.
Is Stripe Publicly Traded?
Stripe hasn’t yet gone through the process of listing shares on public exchanges, so access to Stripe stock is strictly limited. That is a source of endless frustration for investors who want this fintech company in their portfolios.
Most companies hold IPOs long before they reach Stripe’s current valuation, so industry experts are puzzled by Stripe’s apparent commitment to keeping ownership private. Every few months, rumors circulate that the company is exploring options for an IPO, but the founders generally follow up with strong denials.
For example, in late November 2021, co-founder John Collison sat down with CNBC’s Hadley Gamble to address reports that Stripe was considering an IPO in early 2022. Collison explained that despite those reports, “We’re very happy as a private company.”
The conversation took place as Stripe presented at a fintech festival in Abu Dhabi. The company is in the process of expanding its footprint across the Persian Gulf – a market that Collison suggested is “just starting to inflect in terms of its own growth.”
Collison indicated that Stripe is, itself, early in its journey as a company. Therefore, he and his brother, co-founder Patrick Collison, aren’t rushing to take Stripe public.
Is Stripe Going to IPO?
Despite Collison’s denials, many industry analysts are convinced that 2022 will be the year that Stripe makes its Wall Street debut. If true, the company may choose to pass on a traditional IPO in favor of direct listing.
An IPO relies on expertise from a commercial bank to underwrite the process and complete all of the documentation, ensure filings are accurate, and otherwise facilitate smooth issuance of the IPO. However, companies that already have the sort of brand recognition and loyal client base that Stripe enjoys can dispense with the intermediary and list the shares held by owners, investors, and employees directly on the exchange for public purchase.
What Is Stripe Stock Worth In Private Markets?
Stripe is one of the largest privately-owned companies in the world – and it is far and away the largest privately-owned fintech business. Though the value of individual Stripe shares isn’t public information, the value of the company as a whole was reported in March 2021.
At that time, Stripe’s valuation was $95 billion, and it is likely the company has increased in value since. After all, it was only valued at $36 billion in April 2020, which means growth of approximately 160 percent in under a year.
The most recent valuation was reported as part of Stripe’s Series H round of fundraising. In March 2021, the company was able to bring in $600 million, which it immediately reinvested in its Persian Gulf expansion, among other projects.
At $95 billion, if Stripe does go public, it could be a record-breaking move. By valuation, the top five US IPOs of all time include:
- Alibaba Group – $169.4 billion
- Facebook – $81.25 billion
- Uber – $75.46 billion
- AT&T Wireless – $68.15 billion
- Rivian Automotive – $66.5 billion
Though Stripe can’t compete with Alibaba Group on valuation – yet – the longer it delays its IPO, the more likely it is that Stripe will snatch the number one spot when the time comes.
How Do I Buy Stripe Stock Before IPO?
It’s not impossible to buy Stripe stock before its IPO, but the process isn’t easy or cheap.
The only way to acquire shares is through a pre-IPO market like EquityZen, Forge Global, and SecFi. Essentially, these markets buy pre-IPO shares from employees who wish to liquidate stock options or early investors, and then they sell those shares to outside investors who meet certain qualification criteria.
Shares aren’t always available, and when they are, investors may have to meet a minimum purchase amount – $10,000 with EquityZen and $100,000 with Forge Global, for example.
In short, acquiring pre-IPO shares isn’t practical for average retail investors, and even those who qualify may be unable to find pre-IPO Stripe stock available for purchase.
When Can I Buy Stripe Stock?
A better option is to add other promising fintech stocks to your portfolio and wait for Stripe stock to trade on one of the public exchanges before attempting to buy. Stripe hasn’t made any public plans for an IPO, so no specific date is available at this time.
Other fintech stocks that could be smart additions to your portfolio in 2022 include:
There is also a long list of non-financial tech stocks poised for growth in the coming year.
How To Buy Stripe IPO
When Stripe finally begins trading on a public exchange, whether through a traditional IPO or a direct offering, shares will be available for purchase using the same steps that you take for any other trade. Simply create or log into your online brokerage and put in your order.
It’s worth noting that the first few days of public trading tend to be extremely volatile, and the three to six months that follow aren’t much calmer. Many investors stay away from stocks during this period, so they can begin to see patterns and trends before trading.
If your confidence in the company has you planning to buy and hold Stripe stock long-term, then this early volatility isn’t a problem.
How To Invest In Stripe: The Bottom Line
The bottom line is that investing in Stripe isn’t a practical option for most traders pre-IPO. Instead, choose fintech stocks that fit a similar profile, then switch them out once Stripe stock is available to buy.
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