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Introduction

Equity is ownership in the economic returns from a business and a measure of influence over how it conducts its affairs. Founders and employees of startups should understand how equity functions because it forms an important part of how voting power is distributed within companies and how returns are structured throughout the startup ecosystem. Bluntly: if you don’t understand how equity works, you will work for people who do.

By the end of this guide, you’ll understand:

  • how to purchase stock as a founder of a newly incorporated company
  • how vesting works and whether your company should adopt it
  • why IP assignments are important in connection with stock grants
  • why 83(b) elections are so impactful for startup founders

There are many places where you can innovate with your company, but legal practices are rarely one of the most fruitful places to spend your risk budget. Just do what your startup lawyers advise you to do. Details and timing really matter here.

Founders who start their company with Stripe Atlas can use our tool to issue stock to founders—for free—with legal templates from Orrick and terms that are standard among many tech startups and top investors.

This guide is most relevant for startup founders, immediately after they have incorporated a company. We’ll cover the treatment of equity for investors and for startup employees at a later date.

Orrick, the global tech law firm, is the legal partner for Stripe Atlas. Experts at Orrick contributed their expertise to this section (see disclaimer), and Atlas users can access a more detailed Atlas Legal Guide written by Orrick.

There are a variety of vehicles for equity; the most common is shares, which are simply units that represent pieces of the company.

A company will authorize a certain number of shares when it is incorporated (and, perhaps, authorize additional shares from time to time thereafter) and issue them periodically, in return for money, labor, or other valuable things.

Perhaps counterintuitively, founders of a company do not automatically own equity in it. Instead, they purchase their shares (often described as founder stock) from the company shortly after incorporation. As the company has almost no value immediately after incorporation, the shares will be very, very inexpensive. They are assigned a very low price (par value), perhaps on the order of $0.000001 per share. As long as the founder buys shares before any additional value is added to the company, the founder can buy those shares at par value without tax consequences for the founder and the company. It is in founders’ interests to purchase shares when it is obvious that the shares are still valued at par, as soon as possible after incorporation.

Then the founders, and future employees, go about the hard, necessary work of building the business. In addition to creating value in the world and satisfying customers, one goal of the enterprise is to make the business more valuable. This results in the equity in the business becoming more valuable, which provides a substantial portion of the economic returns to founders and employees.

Eventually, if the business is successful, it can be acquired (with each equity owner being compensated, generally in proportion to their ownership interest) or its shares can be traded publicly. These are called liquidity events, because equity in private companies is otherwise illiquid—it cannot be conveniently converted into money.

Equity is recorded on a capitalization table (or cap table), which is a spreadsheet showing who owns how many shares of the company. The cap table lists all founders, investors, employees, advisors, and ex-everything who own a stake in the company.

Since equity is generally awarded via contracts, it can carry terms with it (like vesting, described below) which materially impact how it will function for you.

You get equity by buying it from someone who is selling it on mutually acceptable terms.

In the special case where the someone who is selling it is a corporation you just created, you might have substantial latitude for what those terms are. If shares are purchased at the time of or immediately following incorporation, you’ll generally be purchasing at par value, a number which is very, very low relative to future values of the stock in any successful outcome.

Companies extract a few terms in return for selling equity to you and any co-founders. One is an IP assignment. This is a generally a contract which clarifies that any intellectual property you create over the course of your employment with the company, and potentially related intellectual property you already have created related to the company, is the property of the company rather than you. The IP assignment for IP created during your employment is often formally called a Confidential Information and Invention Assignment Agreement, or CIIAA for short. Stripe Atlas has templates which include IP assignment in the Common Stock Purchase Agreement (to cover IP which predates the company) and a CIIAA for IP created during employment with the company.

Startups often condition purchasing any equity on execution of IP assignments. This is because IP assignment is extraordinarily important for startups to document correctly, as otherwise when a movie is eventually made about your company, it will likely include a subplot about how expensive fixing that problem was. Since founders and employees of startups generally very much want to receive their equity, gating it on IP assignments being signed means that the company reliably collects the signatures needed to establish IP ownership. It also means, by construction, that anyone owning equity in the company is unlikely to have an unresolved IP issue to later use as a negotiating lever against the company.

This is important to both have done and to be able to conveniently demonstrate you have done. Investors and acquirers do not want to take on the risk of working with a company with unclear IP assignments; that invites ruinously expensive lawsuits into their operations years after the fact. If you do not have a well-documented paper trail on IP, when they check your documents during due diligence (routine pre-transaction investigation into you and your company), fixing the paper trail will either cost you a lot of money and stress or it will kill the deal entirely. Don’t let this happen to you; get the contracts your lawyers give you signed, and then keep them in an organized and accessible fashion forever.

Equity generally isn’t simply awarded, it is traded, and it is important to document that an exchange of value for equity actually happened (to avoid unpleasant tax consequences). For founders at the company, who purchase shares at the time of incorporation, this will generally be an exchange of a nominal amount of money (par value times number of shares received) for the shares and/or an assignment of any relevant IP generated prior to the time of incorporation. (Founders that use Stripe Atlas to issue stock purchase their shares with a combination of money and IP.)

Ownership in startups, both for founders and employees, vests over time; it isn’t awarded immediately on joining but rather accrues according to a pre-agreed vesting schedule.

There are a variety of reasons why startups choose to issue equity subject to vesting. Mostly, it is about aligning incentives between the company, the person receiving the equity, and all other owners of the company. Value is created over a very long period of time; ownership of the company should be earned over that period, and not instantly. Otherwise, someone might leave early with substantial ownership that was not earned by producing substantial value.

Imagine a company with three founders. One of them leaves after 3 months. (This happens extremely frequently.) The other two work for the next six years and eventually build the company into a massively successful business that can be sold. Is it a fair or just outcome for each of those three founders to earn the same amount from the sale? No, it is manifestly unfair to the founders who stayed with the company. It is, in fact, so unfair that the depth of the impending unfairness might kill the company as soon as the first founder leaves.

This is an outcome that no one wants. The company would prefer to continue existing; its customers would prefer to continue being serviced; its employees would prefer to continue having jobs; its remaining founders would prefer to continue owning an equitable portion of it; and its departing founder would prefer to not see their work go to naught. Vesting might have prevented the collapse.

Vesting is a contractual right between a company and a person, and is as configurable as any other contractual arrangement.

It is frequently implemented in two parts for founders: awarding the founder shares upfront and, simultaneously, specifying conditions when the company may repurchase some or all of those shares at the cost the founder paid for the shares. The founder’s risk of losing some of the shares generally decays over time according to a vesting schedule, eventually reaching a point where none of the shares are at risk. The individual is then “fully vested.”

For founders, Silicon Valley companies often use vesting schedules where a portion of the shares vest after a fixed period and the remainder vests in equal amounts over a longer term. The standard vesting schedule among companies in the tech industry is “4-year vesting; 1-year cliff.” (This is also the default term for using Stripe Atlas to issue stock for a multi-founder company.)

The fixed period is referred to as the cliff: none of the shares are vested until the cliff date, at which point a significant number of the shares vest. Typically, the fraction of the shares that vests is equal to the fraction of the total vesting period represented by the cliff. Accordingly, under 4-year vesting; 1-year cliff, 25% of the shares vest upon the first year of service being complete.

The remainder of the shares typically vest in equal monthly increments over the remainder of the vesting period. With 4-year vesting; 1-year cliff, the remaining 75% is divided into 36 equal installments that vest monthly over the ensuing 3 years.

Some companies use variations on this vesting schedule, for example, lengthening the vesting period to 5 or 6 years or having the number of shares awarded per month be back-weighted (to incentivize staying at the company for an extended period). It’s important to read your legal agreements very carefully. Vesting math, including edge cases, generally has to be agreed upon in advance; fixing mistakes after a schedule has been agreed upon can be very, very expensive, particularly in the case where the relationship between the founders is strained, as it often is when they have parted ways and a substantial amount of money is on the line.

Founders may be reticent about accepting vesting, because it is a mechanism by which they can lose ownership interest in their own company. Investors and savvy co-founders, however, will generally require you to do it as a condition of doing business with you.

Vesting is particularly important for companies with multiple founders.

Founder relationships can be very intense because startups are intense. Your company will grow in new and unpredictable directions over the next few years, and founders may find themselves growing in ways that are incompatible with the direction of the company. Even best friends sometimes need to separate over the course of doing a company. Vesting gives a pre-agreed, orderly structure to deciding how that breakup happens. Without vesting, arguments over ownership and control after a founder leaves can result in the company disintegrating, leaving everyone (the company, founders who remain, and the founders who leave) worse off than if the company had divided interests in the fashion contemplated by a vesting arrangement.

Vesting is less important for solo founders, since it is unlikely the founder could leave the company and have it survive and be valuable. That said, you may want to consider adopting it anyway – investors will likely require it as a condition of investment (though you can negotiate the exact terms with them). You will also be able to show potential future employees that you are being equitable with regards to vesting their own equity grants; you were willing to do it to yourself, after all. If you choose not to impose vesting at the outset, you can always subsequently impose vesting on your shares with a stock restriction agreement.

Vesting agreements additionally protect the interests of founders and the company from the eventual desires of people who might take the founder’s seat at the table (often without the company’s permission). You might have total trust in your co-founders to optimize for the company’s interests at all times. Even if you do, if tragedy were to strike, their seat at the proverbial table could fall to their heirs or lawyers. Those new parties might not be as automatically supportive of the company’s interests or the wishes of the co-founders as the co-founder they replaced was. Vesting allows you to give an appropriate level of protection to both the future of your company and the rights of all stakeholders, including the new party, in the event someone joins the cap table unexpectedly.

You have limited bandwidth for hard conversations with your co-founders… and preparing contingency plans for every possible failure scenario would result in a lot of hard conversations. Silicon Valley standard terms account for experience with deaths, divorces, lawsuits, and acrimonious founder breakups, sometimes with billions of dollars on the line, and are robust against them, so why reinvent the wheel? Strongly consider adopting industry-standard vesting terms so you can spend your bandwidth on things which will actually make your company more successful.

In most cases, the company will elect to exercise the remaining portion of its repurchase right against any unvested shares the departing founder has purchased. It will do this in the manner specified in the relevant contracts; this may involve giving the founder written notice of the intent to repurchase their unvested shares and then paying back the price they paid for those shares.

Note that the amount paid to repurchase shares or options is not the current value, but the price originally paid for the shares—the repurchase won’t lead to a gain or loss. This means, for a founder who leaves before being fully vested, if their shares are repurchased, they will generally receive only a nominal amount of compensation for the shares.

For example, if a founder owns 4 million shares acquired at a par value of $0.00001 per share, and only 25% of them are vested, the company will repurchase 3 million shares for $30.

Companies should be very, very certain that payment is actually made for repurchased shares, even though the amounts will often be negligible. One very much would not want to discover during due diligence for an IPO that the company was light 3 million shares worth several hundred million dollars because someone forgot to write a $30 check six years ago.

Just as contracts can define vesting schedules, they can also define criteria under which the vesting happens faster than otherwise scheduled. This is called acceleration.

The most common variant of this among sophisticated entrepreneurs results in a percentage of unvested equity vesting upon an event, called a trigger.

There are two main flavors:

Single-trigger acceleration: The founder immediately vests some percentage of their unvested shares after a single event occurs. Typically the triggering event is a change of control, such as an acquisition.

Double-trigger acceleration: The founder immediately vests some percentage (commonly 100%) of their unvested equity after two events occur. Typically, the first event is a change in control (e.g. acquisition), and the second event is the termination of the founder’s employment by the new owner of the company (or a “constructive termination”, where the new owner makes it untenable for the founder to work in their new job).

Both flavors of acceleration protect the interests of founders in the event of acquisitions. There are a variety of reasons for this. One is that surrendering control over one’s employment to the new owners shouldn’t also surrender control over one’s upside due to the value one has created at the acquired company.

Single-trigger acceleration is often preferred by founders / employees relative to double-trigger acceleration, since acceleration is a thing one wants and it is easier to qualify for single-trigger than double trigger. VCs in Silicon Valley generally prefer double-trigger acceleration over single-trigger acceleration. Single-trigger acceleration is not standard in Silicon Valley, though some companies do provide it.

The exact specifics of what constitutes a triggering event are very important and are set by the terms of the stock purchase agreement. It’s important to scrutinize the documents closely and get legal advice.

An excellent reason to provide double-trigger acceleration for founders is to signal that it will also be provided to top employees, who are more at risk of involuntary separation in an acquisition and have very limited ability to extract favorable terms from the acquirer without backing from the founders.

Generally, companies will authorize a certain number of shares when they incorporate but only issue a portion of them initially, dividing them between founders as per their mutual agreement. For example, a company might authorize 10 million shares but only issue 8 million, splitting them evenly between two co-founders.

Those two million are held in reserve for future people to receive them, most commonly employees. Why pre-authorize shares you intend to give to employees? Because authorizing shares requires boring, expensive legal work and filings with the state, but issuing authorized shares can be done relatively easily. Authorizing more shares than you plan to issue upfront will often save you costs and headaches over time; if you don’t end up needing the shares that are authorized but not issued, that’s fine; shares that aren’t issued yet don’t dilute any owner of the company. (Issuing shares that you haven’t authorized, on the other hand, is a recipe for a huge, expensive legal mess.)

You might wonder what dilution is. Basically, as the number of shares in a company increases, each share accounts for less of the ultimate economic value of the company. If you own 4 million shares out of 8 million at the time the company is founded, but need to authorize and issue 2 million shares to employees and 30 million shares to investors, you end up owning only 10% of the company, not the 50% you started with. That is fine and natural! 10% of a meaningfully successful business is likely worth a lot more, as a dollar figure, than 50% of a dream is. But you should be cognizant that dilution happens to you, and every other owner of the company, every time you issue shares to anyone.

Consider the stylized case of a company with 10 million authorized shares, of which 8 million are issued equally to two co-founders. Each founder owns 50% of the company as of today but has indicated that they’re on board with being diluted down to 40% in the case where all shares are issued (likely to employees).

Each additional new issuance, such as in exchange for investment, dilutes the founders (and other owners of the company) further. Dilution is not intrinsically a bad thing, it is simply a price—at some prices it is beneficial to buy things (for example, the participation of an employee or money from an investor) with the hope of providing greater value to the company than the price paid.

You might be curious as to how founder’s equity is taxed. You will almost certainly want to consult professional advisors about it.

If you acquire property (such as stock) at a price below its fair market value, you will have taxable income on the difference between the fair market value and the price you actually paid for the property. One reason founders often purchase their stock immediately after incorporation is so the shares can be purchased when fair market value is par value. They can pay for a large number shares up front (at a nominal price) and have no income on the purchase. They will eventually owe income tax if they sell shares at a gain, but that is likely years down the road.

Shares which are subject to vesting have the substantial risk of being forfeited; they’ll generally be repurchased at a nominal price if the founder leaves the company. The default position under U.S. tax law is that a founder has earned the shares (from a tax perspective, not a legal one) as of when that risk goes away, i.e., when the shares vest. This means that the “spread” between fair market value of shares and the price paid is calculated every time some of the shares vest. If the shares have increased in value before vesting, the shareholder might have enjoyed a paper gain on the difference between par value and the fair market value of the shares. This founder would ordinarily owe income tax on the income that that difference is assumed to represent… even if they cannot actually sell the shares yet.

This math can get brutal. For example, in a stylized example, a co-founder who is vesting 4 million shares of a company worth $20 million with 10 million shares issued will vest 1 million shares a year, or about 83,000 a month. Each is worth $2, so the co-founder would be seen as earning income of about $180,000 a month. This money is not cash—there does not yet exist a market for those shares—but the IRS demands payment as if the founder had actually received $180,000 a month in cash from the company (and similarly, the company owes payroll taxes on that amount).

Enter the 83(b) election: if you file the appropriate paperwork with the IRS within 30 days of acquiring stock, U.S. tax law will instead deem you to have acquired all of your shares when you paid for them. Thus the spread between the fair market value and the purchase price of your shares is calculated and taxed up front (when the shares still have minimal value), rather than as they vest, which will typically result in little or no tax liability.

This is one of the critical housekeeping tasks for early startups. Do. Not. Forget. Your. 83(b). Election. Talk to an accountant or lawyer to see if you should file one and how to file it correctly. This issue has bankrupted very smart, honest taxpayers whose only mistakes were working for a company which got valuable and neglecting to send in a one-page piece of paper by a deadline. Every tax accountant in Silicon Valley can tell you cautionary stories. Don’t become one of them.

When American companies that are publicly traded sell stock, they register those sales with various government agencies. When private companies issue stock to founders, they are almost always exempt from federal registration requirements. It’s generally not necessary to file anything with the U.S. government to qualify for this exemption. But each U.S. state has its own requirements, and companies may need to file for exemptions from registration depending on the states in which the founders are based. Other countries may also have rules that create legal and tax obligations for non-U.S. founders.

It’s important to talk with your attorney to understand if any of these obligations apply.

Stripe Atlas provides a tool that enables founders to generate and sign legal documents to authorize and issue stock to the founding team, using templates provided by Orrick. These templates include standard terms used by experienced entrepreneurs and investors. The tool is available immediately after incorporation (for only 90 days) to companies who have not done anything to increase the value of the company since incorporation - in other words, the fair market value of shares in the company is still par value.

The standard terms used in the tool are:

Vesting schedule: 4-year vesting; 1-year cliff, with even monthly vesting over the 3-year post-cliff period.

Acceleration: Double-trigger acceleration (founders vest immediately if they are fired or constructively fired after a change in control).

Number of shares issued: The number and allocation of authorized shares is up to the founding team; at least 20% of authorized shares will remain unissued so they can be issued to employees, advisors, or service providers in the future.

Price per share: The tool uses the par value chosen at incorporation.

Using these defaults, most Stripe Atlas founders should owe no more than tens of dollars for their founder stock.

If you’d prefer to consult with lawyers to customize these terms, we can give you templates provided by Orrick to work on with your legal advisors to save you some time.

You should always speak with an attorney before issuing equity in your company for the first time; if you don’t have an attorney, we’d be happy to introduce you to attorneys who have helped other Stripe Atlas users.

If you’re not a Stripe Atlas company, we encourage you to receive advice specific to your situation from a qualified attorney in your jurisdiction.

A sampling of issues associated with issuing stock to be aware of: many U.S. states have regulatory requirements to register issuances of shares with them. If you are located outside of the United States, treatment of equity grants or equity vesting can be materially different than described here; you will want to have a qualified local accountant or lawyer explain the implications and help you choose a structure which is appropriate to the founders’ and company’s needs. There may also be additional tax consequences associated with issuing shares. There are other issues, and they are very specific to your circumstances. Seek qualified professional advice.

This guide is not intended to and does not constitute legal or tax advice, recommendations, mediation or counseling under any circumstance. This guide and your use thereof does not create an attorney-client relationship with Stripe, Orrick, or PwC. The guide solely represents the thoughts of the author and is neither endorsed by nor does it necessarily reflect Orrick's belief. Orrick does not warrant or guarantee the accurateness, completeness, adequacy or currency of the information in the guide. You should seek the advice of a competent attorney or accountant licensed to practice in your jurisdiction for advice on your particular problem.

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Stripe Stock Forecast and Analysis

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Stripe’s IPO is one of the most anticipated public offerings of the decade. But will Stripe stock be a buy?

Let’s find out in this Stripe Stock Forecast and Analysis.

What is Stripe?

Stripe is a financial technology company that builds economic infrastructure for the internet.

It was founded by Irish entrepreneur brothers John and Patrick Collison in 2009 and became part of the Ycombinator program.

Stripe’s software and suite of APIs (application programming interfaces) are unlocking the potential of the digital economy and “increasing the GDP of the Internet”.

Stripe is the most valuable private fintech company in the world.

Join The Motley Fool Stock Advisor & see their top ten stock picks for investors to buy right now.

Stripe Stock Investment Potential

#1. Toll Collectors of the Internet

Stripe is the toll collector of the Internet — if a transaction occurs online, Stripe is getting a piece of the pie.

Stripe facilitates a large majority of transactions that occur online. It collects a 2.9% swipe fee and 30 cents per transaction.

We are still in the early stages of digitization, especially when it comes to payments. Expect Stripe to lead and benefit from the merging of the physical and digital worlds.

#2. The Online Economy

Even with the rise of companies like Amazon, Shopify, and Airbnb (ABNB), only 3% of global commerce happens online.

Stripe controls the majority of that 3%, but the online economy still has massive room for growth.

Imagine what happens to Stripe’s bottom line when the balance between digital and physical commerce begins to shift towards the former.

We do not expect this shift to be linear; like most innovations, the initial change is gradual, and then the adoption is rapid, appearing to happen “all at once”.

#3. Partners

Stripe has partnered with millions of companies in over 120 countries, from startups to the world’s largest companies. They trust Stripe to start, run, and scale their businesses.

Stripe has embedded itself into the fabric of the world’s most successful companies. Here are some of the most notable partnerships:

  • Amazon (AMZN)
  • Shopify (SHOP)
  • Zoom (ZM)
  • Salesforce (CRM)
  • Uber (UBER)
  • Peloton (PTON)
  • Reddit
  • Lyft (LYFT)
  • DoorDash (DASH)
  • Slack (acquired by Salesforce)
  • Nasdaq (NDAQ)
  • Spotify (SPOT)
  • Zillow (Z)
  • Target (TGT)
  • Affirm (AFRM)
  • Instacart
  • American Cancer Society

Stripe’s simplicity is its differentiator; its products make adding payment railways to businesses easy.

In addition to Fortune 500s, Stripe powers the kinds of companies that couldn’t exist even ten years ago by providing new models like crowdfunding, on-demand apps, and marketplaces.

#4. Pivoting into New Markets

Stripe continues to add new platforms and products that are generating massive demand from businesses of all types.

It recently launched a banking service called “Stripe Treasury” that offers bank accounts to customers who use Stripe’s platform.

Goldman Sachs, Citigroup, Barclays and Evolve Bank & Trust partnered with Stripe for this launch.

This is just one example of Stripe expanding its reach. It has the customer base and distribution to enter new markets and bully niche fintechs.

#5. Stripe the Venture Capitalist

These pivots are made possible by Stripe’s aggressive venture arm — the company is active in the VC space and has participated in several funding rounds recently.

By embracing (acquiring) new technologies, Stripe can stay ahead of the innovation curve and partner with the very best niche fintechs worldwide.

Given Stripes unprecedented funding rounds, there will be plenty of capital to throw around.

#6. Will FAAMG Become Plural?

Some believe that Stripe has the potential to become the next trillion-dollar company.

That would represent an 8-15x increase from its current valuation and put it amongst the illustrious FAAMG stocks.

Stripe thrives when FAAMG thrives, but it doesn’t face direct competition from any of these names.

This dynamic allows Stripe to benefit from Big Tech’s positives (revenue) without the negatives (getting eaten).

See: Apple Stock Forecast

Stripe Stock Moat

Stripe’s moat is similar to other effective software companies that provide services for businesses: a superior offering that embeds itself into the fabric of a company and then spreads its wings.

This strategy is akin to Salesforce’s moat. Provide a core offering that adds so much value and convenience that the idea of parting ways with it is nauseating.

Stripe can then cross- and upsell additional products and features to further lodge itself into the infrastructure and operations of its customers.

This sparks a reinforcing cycle that creates a win-win for Stripe and the client:

  1. Stripe product helps Company X increase revenue
  2. Company X reinvests the increased revenue in additional Stripe services to accommodate growth
  3. Stripe collects larger and more frequent swipe fees from a more successful Company X, in addition to fees from added services like Stripe Treasury or fraud management

It also helps that Company X can be Amazon, Shopify, Salesforce, Uber, or Zoom — quality, high-growth companies.

See: Google Stock Forecast

Stripe Valuation and Analysis

Stripe raised $600 million in its Series H funding round, valuing the company at $95 billion. This is nearly triple its $36 billion valuation from April 2020.

It is also rumored that secondary market transactions priced Stripe in the $125 – $150 billion price range.

According to an unnamed board member, the capital raised will be “a rainy day fund.” This round increased the Irish brothers’ fortune to $11.4 billion each.

In addition to announcing the latest round, Stripe revealed that it plans to “invest a ton more in Europe this year”.

See: Tesla Stock Forecast

Stripe Stock Competition

The fintech space is red hot due to smartphone-enabled payments and banking. As new technology expands this ecosystem, expect Stripe to face some competition.

Here are Stripe’s top 9 competitors:

  • Square (SQ)
  • PayPal (PYPL)
  • PayPal owned Braintree
  • Adyen (ADYN)
  • WePay
  • Payline Data
  • 2Checkout
  • Amazon (AMZN)
  • PaymentCloud

However, expect this list to expand as Stripe inevitably enters new markets.

See: Best Fintech Stocks

Stripe Stock Bear Case

#1. Private Market Growth

Stripe’s public offering is one of the most anticipated IPOs in history. Some investors are concerned that this level of demand will make the company overvalued by traditional metrics.

There were a handful of IPOs in 2021 where much of the gains were being had in the private markets. Companies like Airbnb chose to stay private longer and go public at much higher valuations.

Stripe has subscribed to this model, too. Some believe the company could go public at a $150+ billion valuation.

Like most high-growth technology stocks, you’ll be paying a premium to own Stripe stock.

See:Palantir Stock Forecast

Stripe Stock Allocation in Your Portfolio

Stripe stock might not be for you — each stock comes with its own set of unique risks, just like each investor comes with their own goals and risk profiles.

Regardless of your investment philosophy, the following questions might help you determine how Stripe stock will perform in the long term:

  • Is Stripe positioned well to benefit from the rise of digitization?
  • Can Stripe fend off competition from smaller fintech companies?
  • Will new forms of payments disrupt Stripe’s business model?
  • Will demand for shares make Stripe overvalued?
  • Is it worth “overpaying” for Stripe in 2021 from a regret minimization perspective?
  • Is Stripe vulnerable to future crypto technologies?
  • Has Stripe grown too much in the private markets?

See: Netflix Stock Forecast

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Stripe Stock Analysis FAQs

Is Stripe a publicly-traded company?

No, Stripe is not a publicly-traded company. It was founded in 2009 and has been a private company ever since. Stripe will likely remain a private company for some time.

Can I buy shares in Stripe?

Stripe is a private company, and therefore shares in Stripe are not available to the retail investor. You can buy shares in Stripe following its initial public offering, which has not yet been announced.

Will Stripe have an IPO?

In 2020, Stripe’s founder John Collison told reporters that the company has “no plans” to go public right away. However, several private fintechs have gone or are gearing up to go public in 2021, such as Robinhood, SoFi, Chime, and Plaid.

What is Stripe stock?

Stripe stock would represent partial ownership in the financial services company following its public offering. Many investors believe Stripe stock will be a good investment because of the company’s positioning in the digital economy — it is the backbone of the internet.

See: Microsoft Stock Analysis

Bottom Line: Stripe Stock Forecast

It’s unclear when Stripe will IPO, but one thing’s for certain: Stripe stock will be on everyone’s watchlist.

And you’ll have to pay up if you want a piece.

More Stock Forecasts and Analyses:

Private Companies:

This article is for informational purposes only. It is not intended to be investment advice.

Sean Graytok

Sean Graytok

Sean is a student of the financial and technology industry. He is interested in the people and companies who are driving the innovation that will change our future.

Sours: https://simplemoneylyfe.com/stripe-stock-forecast-analysis/

Stripe Stock

About Stripe Stock

Stripe is a technology company that builds economic infrastructure for the internet. Businesses of every size—from new startups to public companies—use Stripe's software to accept payments and manage their businesses online. 

Stripe was founded in 2010 by two brothers, Patrick Collison and John Collison. The company is headquartered in San Francisco. 

Stripe Overview 

Source: Stripe

Investors

Allen & Company

Stripe, Vroom, Ginkgo Bioworks, Joby Aviation, Blend, Convoy, Freenome, Turo, OfferUp, Virta Health

American Express Ventures

MobiKwik, Stripe, Tradeshift, Rent the Runway, Turo, Better.com, Signifyd, Boxed, Menlo Security, BigCommerce

Andreessen Horowitz

Lyft, Robinhood, Databricks, Airbnb, Instacart, Magic Leap, Stripe, Zenefits, Rappi, Pinterest

CapitalG

Lyft, Airbnb, Stripe, UiPath, CrowdStrike, MapR Technologies, Collibra, Looker, Armis Security, Glassdoor

Founders Fund

Lyft, SpaceX, Spotify, Airbnb, Stripe, Palantir Technologies, Wish, Compass, Zenefits, Flexport

General Catalyst Partners

Snap, Jet, Stripe, Oscar Health, Vroom, Deliveroo, Samsara, Cityblock Health, Hopin, Getaround

Khosla Ventures

Instacart, DoorDash, Stripe, Palantir Technologies, Impossible Foods, View, Zenefits, Opendoor, Oscar Health, Affirm

Kleiner Perkins Caufield & Byers

Snap, AppDynamics, Spotify, Instacart, Magic Leap, DoorDash, Stripe, Epic Games, Bloom Energy, Slack

Lowercase Capital

Stripe, Slack, Twitter, Automattic, Lookout, Twilio, Tala, Mark43, Medium, Optimizely

Redpoint Ventures

Stripe, Pure Storage, Collective Health, Twilio, HashiCorp, DraftKings, MapR Technologies, Sonos, Looker, Zuora

Sequoia Capital

Market Kurly, Robinhood, Airbnb, Instacart, Tokopedia, DoorDash, Stripe, UiPath, Moderna Therapeutics, Rappi

SV Angel

Snap, Instacart, DoorDash, Stripe, Zenefits, Pinterest, Opendoor, Slack, Jawbone, Cloudera

Thrive Capital

Instacart, Stripe, Compass, Opendoor, Nubank, Slack, Oscar Health, Unity Technologies, Cityblock Health, Noom

Y Combinator

Airbnb, Instacart, DoorDash, Stripe, Zenefits, Rappi, Flexport, Ginkgo Bioworks, Coinbase, Faire

Funding History

July 2010$100K
August 2010$1.5M
May 2011$1.3M
April 2012$18.0M
August 2012$53K
August 2012$53K
June 2013$29K
January 2014$80.0M
December 2014$70.0M
May 2015$100M
June 2015$13.2M
July 2015$15.0M
November 2016$150M
September 2018$245M
January 2019$102M
September 2019$736M
April 2020$175M
March 2021$525M
March 2021$75.0M

Management

Cofounder and Content Strategist

Patrick Collison

Cofounder and President

John Collison

Chief Financial Officer

William Gaybrick

Chief Operating Officer

Claire Hughes Johnson

Chief Business Officer

Billy Alvarado

Press

Payment Gateways Market Analysis Focusing on Top Key Players – PayPal, Stripe, Amazon Payments, Authorize.net, WorldPay, Adyen, CCBill, 2Checkout, First Data

Digital Journal - Nov, 15 2018

Other Companies

Sours: https://equityzen.com/company/stripe/

Price stripe stock

Hailed as the most valuable US technology start-up, payment processing firm Stripe is planning to debut on the stock market as a public company in the second half of 2021. Read on to discover the details of Stripe’s initial public offering and how to get involved with the process.

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An official IPO date hasn’t yet been released, although Stripe filed its intentions to IPO with the Securities and Exchange Commission (SEC) in July 2021, so it is expected that the company will go public in the third or last quarter of 2021.

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The company also hasn’t disclosed a particular stock exchange that it intends to list on but given that it is a US-based company, we can predict that it will be either the New York Stock Exchange or the Nasdaq. The latter in particular is a popular choice for technology companies. Some of the biggest IPOs in terms of raised funds within the past year that have listed on the Nasdaq include Airbnb, Coinbase and Bumble, whereas the New York Stock Exchange holds new listings from Snowflake, DoorDash and DiDi.

Stripe was last valued by investors at $95bn in a fundraising round in March 2021, which is an increase of over 160% from its previous valuation in 2020. It has a large private market value, which is even higher than companies such as SpaceX and Instacart.

Overall, the company has raised $2.2bn in funds from 39 investors. It is planning to use the funding for the following purposes:

Invest more in European operations, as the potential for the digital economy in countries like Ireland is booming.

Strengthen enterprise leadership in the market, by boosting revenue through expansion on a global level and creating more market opportunities.

Expand its infrastructure for the Global Payments and Treasury Network, namely in Brazil, UAE and India.

Along with the date, a share price will be revealed at a later stage, along with the number of shares that the company is planning to float on the exchange.

There is limited information on Stripe’s financials, given that it is a private company and is therefore not required to release reports on revenue and profitability. However, according to the Wall Street Journal, the company’s revenue rose by 70% in 2020 to a figure of around $7.4bn.

According to its website, only 14% of commerce takes place online, despite the global economy’s shift towards a digital working. Stripe processes hundreds of billions of dollars per years for businesses worldwide, so its mission is to grow the GDP of the internet, which will make it easier for other companies to follow suit.

The IPO is rumoured to be even bigger than Coinbase and Roblox, given that Stripe is the most highly valued start-up company in the US, with a market capitalisation of almost $100bn.

The company boasts on its website that 90% of adults have bought from companies using Stripe’s platform, which is used in over 35 countries and supports over 135 currency and payment methods. Stripe’s list of blue-chip clients includes Google, Amazon and Zoom.

The online payment industry is booming thanks to the Covid-19 crisis, where the majority of transactions have been switched to digital rather than paper.

Early investors of the company include Sequoia Capital, Allianz X, Baillie Gifford, Axa and Fidelity Management at different stages, as well as angel investors like Elon Musk (CEO of Tesla) and Peter Thiel (co-founder of PayPal and Palantir).

Stripe itself has invested in a number of well-known and start-up businesses over the years, including Monzo, Rapyd, Balance, Step and Assembled. The company also focuses on acquiring companies that can help to increase its global product offering. For example, it bought the Nigerian tech company Paystack in 2020 to expand its business in Africa, as well as software start-up Index in 2018, which could help Stripe compete for an in-store market share as well as online.

Remaining a private ‘unicorn’ company for so long means that Stripe has missed out on using its shares as currency to finance operations and acquisitions, as well as an incentive to employees to become shareholders.

Fintech is a large industry and Stripe faces competition from many other tech giants.

IPOs can be a volatile process, especially when one is predicted to be oversubscribed or overvalued. Stripe’s $95bn estimated market cap could deter some investors away, as it has potential to crash upon its stock market debut.

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There is a number of high-profile companies within the payments industry, the fiercest competition possibly coming from San-Francisco giants PayPal (PYPL) and Square (SQ), Amsterdam-based Adyen (ADYEN) and London-based Wise (WISE). Formerly known as TransferWise, the company recently launched on the London Stock Exchange in July 2021.

These stocks are all available to trade on via spread bets and CFDs on our Next Generation trading platform while you’re waiting for Stripe’s IPO to launch.

Other smaller platforms that rival Stripe are WePay, Braintree, Dwolla, Worldpay and 2Checkout. In early 2021, Reuters also reported that Swedish buy-now-pay-later platform Klarna may be opting for a direct listing later this year, which could put further pressure on the industry. The company is said to have raised over $3.1bn in funding and was last valued at $31bn back in March 2021.

As we don’t yet know the full details of Stripe’s IPO, including its expected date or share price, these will be announced as the company gets further along the process. Therefore, it’s important to keep an eye out for stock market news and announcements.

By entering your email address into the box above, we will notify you when Stripe stock is available on our platform. You can also enable trading alerts on your desktop or mobile device after setting up an account, so that you don’t miss out on any vital IPO developments.

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You will be able to spread bet and trade CFDs on Stripe shares when it has listed on a stock exchange and is available to the public. Decide whether you would prefer to spread bet or trade CFDs, as both products offer different benefits and risks.

Stripe plans to hire investment banks later on in the IPO process, but has already selected Cleary Gottlieb Steen & Hamilton LLP as a legal advisor for early-stage preparations for the listing.

Investors predict that Stripe will go public in Q3 or Q4 of 2021, although IPOs can be a long process, so it may be delayed until early 2022. See which other companies are planning their upcoming IPO that you may be interested in.

Stripe makes money by charging transaction fees to clients, which can depend on the size of the business. Fees are negotiated on a case-by-case basis for larger clients, as their volume and values of sales will be taken into account into pricing.

Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

Register for an account to get started. Once the shares are available on our platform, you will be able to spread bet or trade CFDs on Stripe's share price.

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As the market began to recover from the COVID-led decline last spring, the market grew ripe for a new batch of public companies. Investors were eager to get a piece of newly-public companies like Palantir, Bumble and Roblox, and their appetite is showing no signs of fading. Next on the list could be Stripe Inc., the payment processing firm that began as a small startup in Ireland. Today, Stripe serves millions of businesses through its API software that makes accepting and sending online payments a breeze. 

Companies that reduce friction in the payment processing space like Square and PayPal have seen incredible success since becoming public entities. Could Stripe be the next to follow in their footsteps?

When is the Stripe IPO Date?

No date has been set for the Stripe IPO, but anticipation is brewing for shares to become available. A recent valuation reported in Bloomberg put the company $36 billion, a stunning number for a firm that’s barely more than a decade old. Further valuations have been even higher, approaching or even exceeding $100 billion.

When Stripe does move forward with an IPO, it remains to be seen whether it uses a direct listing or Special Purpose Acquisition Company (SPAC) to enter the public markets. SPACs have become an undeniably popular way to move private firms into the public sphere because they’re faster and cheaper than traditional listings. However, with a $36 billion valuation as of October 2020, Stripe likely won’t have trouble affording the underwriters.

Stripe may also choose a direct listing, shirking the traditional IPO, because it doesn’t need to raise money. Currently, the firm is using private tender offers to allow certain investors and employees to cash out, turning their holdings into liquid assets. However, the firm. is merely setting the stage for a listing that allows it to enter the public sphere, allow anyone to buy in and increase its value.

Moreover, the firm can use that cash to further grow, expanding faster than it is right now. Because an IPO date is not yet set, investors must wait until Stripe makes a further announcement, but into a private equity tender or wait until a Stripe IPO settles down after its release.

Stripe Financial History

Stripe began in 2010 with Irish brothers John and Patrick Collison. Frustrated with how difficult it was to pay for items through online businesses, the two young entrepreneurs began working on the prototype that would become Stripe. The goal was to create a user-friendly application that could enable more business to be done on the internet. 

By 2011, it was obvious the brothers were on to something majorly successful and others began to take notice. Elon Musk and Peter Thiel, who teamed up to form PayPal, gave the startup $2 million in seed money in early 2011. Andreessen Horowitz and Sequoia Capital soon followed with investments and Stripe was off and running.

To date, Stripe has done an impressive 14 funding rounds, raising more than $1.6 billion in cash. In addition to Andreessen Horowitz and Sequoia, notable firms like Tiger Global Management and DST Global have participated in the funding rounds. The company is now headquartered in San Francisco and employs more than 2,500 full-time employees. While a private valuation of $36 billion was made last October, the company would likely be worth double that on the public market.

Stripe Potential

Stripe has the potential to be one of the most successful IPOs of 2021. While competitors like PayPal and Square have established themselves, Stripe users rave about the simplicity and ease with which they can navigate the platform. Some of the world’s biggest and most successful companies count themselves as Stripe clients, including Amazon, Microsoft, Uber, Google, Salesforce, Shopify and Nasdaq. In addition to their mission of painless online payments, Stripe also offers other business solutions like anti-fraud protection, credit card issuance and financing options. 

Stripe has the chance to be a $100 billion unicorn. While even the most promising tech IPOs can stumble out of the gate, Stripe helps with the one key thing that all online businesses crave — reducing friction at the point of sale. With a strong customer base, array of products and plenty of market share still up for grabs, Stripe has a case for the strongest IPO buy of the year.

How to Buy Stripe IPO Stock

Buying shares of an IPO isn’t like purchasing them on an exchange. You’ll need to jump through a few extra hoops if you want to acquire shares before they hit the open market. Remember, however, that IPOs and private equity tenders tend to be priced higher than a common stock because of investor anticipation and market sentiment. Here’s how to proceed when you are ready to invest in a potential Stripe IPO.

  1. Pick a brokerage.

    You’ll need to find a broker that can get you shares of an IPO before trading begins. One of the downsides of using discount online brokers is they often lack access to these types of new issues (looking at you, Robinhood and Webull). So you’ll need a broker that not only fits your trading goals and style, but one that can get the shares you’re looking for. Some brokers have a minimum purchase amount in order to get shares directly from the company — be sure you have enough capital to make a buy.

  2. Decide how many shares you want.

    IPO share prices usually leak out ahead of time, so even if you’re buying shares on the open market, you’ll get a heads-up on the amount you’ll need to buy the stock. New issues can be extremely volatile, so don’t purchase more shares than you feel comfortable with. If you want to get in before the shares hit the exchanges, you’ll have to make a mandatory minimum investment, which can vary from broker to broker.  

  3. Choose your order type.

    If you get your shares directly from Stripe before they reach the open market, you won’t need to worry about order types. But if you’re buying from an exchange, you’ll need to decide whether you want a limit order to lock in a specific price or a market order to quickly get the shares in your account. Market orders are prone to slippage when stocks are volatile, meaning the price you see isn’t always the price you get. Be cautious when using market orders with new issues.

  4. Execute your trade. 

    Once your order is ready, place it and execute your trade. If you pre-order shares before the IPO date, you’ll have them deposited into your account from the broker before the stock goes live. But if you’re unable to procure shares ahead of time, you’ll need to find a good entry point before executing your trade. Keep your profit and loss targets in mind when searching for a spot to open a position.

Best Online Brokers

Below is a list of best brokers for your consideration.

Sours: https://www.benzinga.com/money/how-to-buy-stripe-ipo-stock/

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