[HN Gopher] Stripe announces new round of funding and plan to pr...
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Stripe announces new round of funding and plan to provide employee
liquidity
Author : felixbraun
Score : 116 points
Date : 2023-03-15 21:36 UTC (1 hours ago)
(HTM) web link (stripe.com)
(TXT) w3m dump (stripe.com)
| margorczynski wrote:
| The company is 12 years old, the biggest player in their domain
| (online payments) and still needs that much funding? Where is it
| time to turn the knobs and start producing income?
| kansface wrote:
| > The funds raised will be used to provide liquidity to current
| and former employees and address employee withholding tax
| obligations related to equity awards, resulting in the
| retirement of Stripe shares that will offset the issuance of
| new shares to Series I investors. Stripe does not need this
| capital to run its business.
| bootsmann wrote:
| > The funds raised will be used to provide liquidity to current
| and former employees and address employee withholding tax
| obligations related to equity awards, resulting in the
| retirement of Stripe shares that will offset the issuance of
| new shares to Series I investors. *Stripe does not need this
| capital to run its business.*
|
| It's the second paragraph of the OP
| serial_dev wrote:
| Well, don't they, though?
|
| The way I understand it is that if they wouldn't have this
| round, lots of very valuable, tenured employees would be f-ed
| over, which could cause them to leave on very bad terms and a
| PR nightmare that could make attracting workers hard.
| zaroth wrote:
| No, they don't.
|
| There's an appreciable difference between a company selling
| newly issues shares to fund their corporate expenses, and
| arranging a liquidity event for your employees. That's what
| they are explaining in that paragraph.
|
| Obviously it can be very much in their interest to do this,
| while it is still also true that "Stripe does not need this
| capital to run its business."
| thgirhet wrote:
| [dead]
| tamade wrote:
| That last sentence is corporate PR spin. They very much need
| this capital to run the business, ie, they didn't have enough
| money to pay taxes.
| zaroth wrote:
| They aren't raising the money to pay corporate taxes.
|
| They are doing this so their _employees_ can pay taxes on
| otherwise illiquid shares (i.e. taxes the employees can't
| afford).
| camjw wrote:
| They could have just let employee options expire and then
| they wouldn't have had the tax bill. Though, I imagine
| recruitment would become a bit harder then.
| jeremyjh wrote:
| They didn't have enough to pay their employee's taxes on
| unrealized gains.
| HDThoreaun wrote:
| If paying your employees in stock with no plan to IPO is how
| you run your business then you do in fact need capital to pay
| taxes on that stock in order to keep your employees.
| [deleted]
| superfrank wrote:
| If I'm understanding this correctly, this is less about raising
| money for the company and more about letting current employees
| cash out some stock.
|
| It's a roundabout way for employees to sell stock to investors
| with Stripe acting as a middle man.
| jonny_eh wrote:
| Why not go public instead? Wouldn't that be cheaper?
| xoa wrote:
| They'd planned to IPO, but the market for that right now is
| very, very bad. They only have one chance to get maximum
| value for their IPO and it's understandable they'd want to
| wait. Not like being private for another few years hurts
| them any after the previous decade, this isn't a company
| going for an asap exit. However, there is the 10 year hard
| limit for options, so this appears to just be a maneuver to
| deal with these two conflicting realities.
| elAhmo wrote:
| This part is confusing to me. Yes, the market is bad and
| their IPO would probably be way less than it would've
| been if the market was "healthier".
|
| But if the market recovers and they want to do an IPO
| then, wouldn't they be in the same position if they IPOd
| now, and then growth of the market would cause their
| stock to grow as well?
| lozenge wrote:
| Firstly, a good or bad IPO can be remembered for years as
| part of the reputation of the company.
|
| Secondly, yes their stock could grow after the IPO,
| however the stock would be publicly owned at that point
| so the profit would go to the public shareholders instead
| of the current holders of the stock (founders, investors,
| employees).
| waboremo wrote:
| Employees cannot wait, their shares expire without sale.
| These are being taxed.
|
| Stripe can wait, that isn't the problem for them and is
| what they're doing. The board can also waive these fees,
| but that shifts liability from Stripe to each individual
| employee in question and that's the last thing they want,
| to piss off early employees.
| [deleted]
| habitue wrote:
| If you go public, there are a bunch of requirements on you
| as a company. you have to regularly tell everyone your P&L
| and a bunch of other things Stripe would rather not tell
| anyone.
| sb8244 wrote:
| I'm a bit cynical when I see stuff like this. Is it a way for the
| company to exit employee shareholders and put that equity into
| investor hands? Especially at a discount from peak?
|
| That can be good for employees (money in your bank is a good
| thing), but only if they want to sell.
|
| Edit: there's another thread with more info. This round looks to
| address a specific issue that would affect employees very
| negatively. So it seems like a good thing and not corp greed.
| auntienomen wrote:
| It depends whether current employees are getting their next RSU
| before or after this down-round.
| Zetice wrote:
| I thought a frequent reason for this kind of thing was that
| they had planned on doing an IPO which would have also let
| employees sell (eventually, after a lockup period?) but given
| the current market they're waiting.
|
| Also didn't another company recently do this because of some
| expiring stock options? If employee options expire that's
| basically a death knell to your ability to recruit and those
| employees would all hate you and quit. Maybe there's some of
| that going on here.
| sb8244 wrote:
| I think you're right after reading more. Sounds like RSU are
| expiring. Not sure about options but 10 year is the options
| limit so that would align with the age of the company.
| kevinventullo wrote:
| I suspect it will generally be good for employees. In my
| relatively recent job search, I was considering Stripe versus
| some large publicly traded tech companies. I ruled out Stripe
| largely because the equity would not be liquid.
| thaumasiotes wrote:
| What does the tax treatment look like? I'm aware of the
| following:
|
| 1. Get options, pay nothing.
|
| 2. Exercise options, pay AMT.
|
| 3. Sell stock, pay capital gains.
|
| (Please point out anything missing; it's missing because I
| don't know about it.)
|
| Assume that the timing of step 2 is nondiscretionary and the
| stock price is temporarily depressed when it occurs.
|
| Assume that you have to pay the AMT by selling some of your
| stock until you've sold enough to cover the whole AMT.
|
| If the AMT is a lump sum (seems... unlikely?), then the
| depression in the price at the moment you have to pay it is bad
| for you.
|
| If the AMT is a percentage of the value of the stock (my
| guess?), then by the assumption that you have to pay for it by
| selling stock, you're going to lose a fixed percentage of your
| stock no matter what the current stock price is.
|
| If we relax that assumption and you take out a loan to pay the
| AMT, the depression in the stock price is good for you, because
| you end up making a profit on holding your shares while they
| recover.
|
| In step 3, you sell your stock at the "natural" price. I guess
| that since the stock was temporarily depressed, it's now higher
| and you pay a capital gains tax on the difference. Is the tax
| rate higher or lower than the rate you paid for the AMT? If
| it's equal, what difference did the temporary depression of the
| stock price make?
| Retric wrote:
| It's a little more complicated because options aren't set at
| zero value, and you can't subdivide individual shares so
| rounding occurs. But essentially yes.
| harikb wrote:
| Fun fact: You have to pay AMT on exercise even if the stock
| cannot be sold in the open market. Usually this means dipping
| into ones other savings. It hurts even more than you are
| paying AMT on fictitious valuations (if the company is not
| public yet) and you really can't be sure if they will ever go
| IPO
| lechacker wrote:
| A 50% drop is a big oof moment for Stripe. But then again I don't
| think the company was every really worth +90b dollars.
|
| If I were an employee I'd take the liquidity now before this goes
| the way of WeWork
| thaumasiotes wrote:
| > Stripe [] has signed agreements for a Series I fundraise of
| more than $6.5 billion (EUR6.15 billion) at a $50B (EUR47B)
| valuation. Primary investors include ...
|
| > The funds raised will be used to provide liquidity to current
| and former employees and address employee withholding tax
| obligations related to equity awards, resulting in the retirement
| of Stripe shares that will offset the issuance of new shares to
| Series I investors. Stripe does not need this capital to run its
| business.
|
| As I read this, the plan is to issue a number of shares, buy
| exactly that many shares from Stripe employees, and retire the
| purchased shares.
|
| Why do it that way instead of allowing the employees to sell
| their shares into the Series I offering?
| boucher wrote:
| I imagine it's as simple as employees own common stock and
| investors want preferred stock.
| bootsmann wrote:
| Probably easier to do legally. Usually your option shares have
| a clause that you are not allowed to sell them on the secondary
| market (which this would be).
| tqi wrote:
| For people with expiring RSUs, is the choice then to take this
| deal (@ at 50 billion valuation) or get nothing?
| HDThoreaun wrote:
| I think it's this, or keep the shares and pay taxes yourself.
| auntienomen wrote:
| No, it's not take it or get nothing.
|
| People have RSUs. Those RSUs vest at some point. When they
| vest, they have to pay taxes on them, at whatever value they
| have at that moment. This raise allows Stripe's employees to
| pay those taxes, and gives them a chance to sell if they want
| to. If they don't sell, they'll have to wait for future
| liquidity events, like private raises, buybacks from Stripe,
| or IPO.
|
| The down round is appealing if you're intending to hold the
| shares until later, because you pay employee taxes at a low
| valuation, and then capital gains on the difference between
| that low valuation and your eventual sale price.
| c7DJTLrn wrote:
| Will any of the funding go towards improving the customer
| experience? HN has been a Stripe support hotline the past few
| months.
| jrdngonen wrote:
| Tender offers can be pretty tricky for employees to navigate
|
| Put together a quick guide all about taxes/financial implications
| of participating in a tender offer:
| https://manual.withcompound.com/chapters/what-to-do-if-your-...
| magneticnorth wrote:
| Does this imply that Stripe thinks an IPO in this market would
| value them lower than $50B?
| blobbers wrote:
| No, not at all. Nobody would invest if they thought that were
| the case. It does mean they believe they will need to delay
| their IPO a year or more.
| cperciva wrote:
| It might be a matter of executive preference. Lots of people
| don't want to deal with the regulatory attention and mandatory
| reporting which comes from a company being publicly traded.
| auntienomen wrote:
| Not really. On general grounds, you expect to take a haircut
| when you offer shares privately, because there are fewer
| investors competing for the shares you're selling.
| bfeynman wrote:
| or fact that private investors are looking at making their
| own return.
| paxys wrote:
| Stripe missing the 2018-2021 tech IPO window is going to be seen
| as a historic business decision making failure. Everything was in
| their favor. They could have sleepwalked into a $120B+ market
| cap. All employees and investors could have had as much liquidity
| as they desired. But for whatever reason the founders stuck to
| their "we will stay private forever" stance, and the entire
| company is suffering because of it.
| danielmarkbruce wrote:
| This isn't right. They needed to raise several billion. Whether
| they give up 5% or 10% of the company is a rounding error in
| the grand scheme. For context, many stocks went up or down 5%
| today because some dude in europe said they won't put more
| money into credit suisse. Tomorrow they might go up 5% because
| Elon farts in a certain direction.
| hesparrow wrote:
| The article states they raised billions to allow employees to
| sell their (otherwise soon to expire) RSUs to investors to
| cover their tax bill. Stripe itself isn't using the money.
| danielmarkbruce wrote:
| Yes. But what is your point?
| strangattractor wrote:
| That direction is West for increases in the Financial sector,
| East for decreases and South whenever he has a new Baby
| Momma. North is probably a bad lunch in Qatar when seeking
| funding for Twitter.
| varispeed wrote:
| > All employees and investors could have had as much liquidity
| as they desired.
|
| Not necessarily. Investors see employees as a cost, necessary
| evil, nuisance. There would be a strong push for layoffs and
| maximisation of profit. Some investors could even try for asset
| stripping and extract as much value as possible in the short
| term to fund their other investments.
|
| It is very much universal, once company does IPO it basically
| turns into cr*p.
| gkoberger wrote:
| They could have hit $120B market cap at one point, but all
| public tech stocks are significantly down since then. For
| example, their closest competitor Adyen hit $31, but is now at
| $14. So with this logic, Stripe's valuation would be almost
| exactly where it currently is.
|
| Yes, a lot of former employees could have become liquid. But a
| lot also would have had money tied up exactly the same way it
| is now, except on a much more volatile public market where
| their every move would be much more scrutinized.
| sangnoir wrote:
| > They could have hit $120B market cap at one point, but all
| public tech stocks are significantly down since then
|
| I think that's parent's point: investors and current stock
| holders could have transferred $120B from retail investors
| before the adjustment. Now _they_ have to hold onto their own
| devalued stock like a bunch of rubes. /s
| danielmarkbruce wrote:
| That isn't how it works. Going public at $120 bill
| valuation doesn't mean you raise $120 billion. They'd have
| raised something like they have here.
| lotsofpulp wrote:
| The employees would have had the option to sell the Stripe
| stock and invest in something significantly less volatile,
| such as an index or bond ETF.
| gkoberger wrote:
| Sure, some could. But between lock-up periods and vesting,
| almost everyone working at the company wouldn't be in the
| position to be able to do this.
| idopmstuff wrote:
| Lockups are usually 90-180 days, and Stripe is old enough
| that lots of employees are fully vested. Maybe a
| significant number of employees wouldn't be in a position
| to because their growth means that most employees
| would've been hired relatively recently in that
| timeframe, but the people who were then since the early
| days and who have the most equity would all have been
| able to sell before the market turned down.
| neximo64 wrote:
| Exactly right. If it was an IPO, the $6.5B would go into
| Stripe's bank account to grow the business instead of buying
| out shares from employees who have to sell. And sure maybe they
| didn't need that money, but it could have helped acquire
| companies and grow more.
|
| This deal is basically the preamble to a direct listing. Which
| again would not help Stripe raise funds but instead merry go
| round shareholders.
| htrp wrote:
| probably not as bad as the wework botched ipo.... but your
| point remains
| lotsofpulp wrote:
| Wework had indefensible problems with their business model,
| hence sinking even in the frothiest of times. Stripes would
| have surely fared much better.
| paxys wrote:
| Wework's problem wasn't timing. They actually chose to go
| public under perfect market conditions, just that their
| underlying business was _so_ out of touch with reality that
| not even the most optimistic institutional investors or
| bankers could digest it.
| TheNewsIsHere wrote:
| I have been reading Billion Dollar Loser by Reeves
| Wiedeman. That out of touch quality that seemed to permeate
| WeWork was seemingly there from the beginning, courtesy of
| Adam Neumann. To say that he comes off looking delusional
| is being kind.
| rvz wrote:
| This is all down to greediness. Instead of IPO'ing in 2019, not
| even $95BN is somehow enough?
|
| A direct listing is probably a better option since it will be
| even more difficult for them to raise again for an IPO this
| year, given the current market turbulence.
| [deleted]
| efields wrote:
| > Stripe does not need this capital to run its business.
|
| Suffering? Raising $6.5b when you don't need to, but because it
| helps your longest running employees, is suffering?
| paxys wrote:
| Their last raise was at a $95B valuation, so this is a
| _massive_ down round. It isn 't a case of raising extra
| unneeded money just because market conditions are favorable.
| Quite the opposite in fact. If they didn't critically need
| this money they wouldn't have taken the hit at all.
| rubiquity wrote:
| An IPO during that time would certainly help stock holders get
| liquid but it wouldn't help the business given that Banks/Firms
| were making a killing on the IPOs of that era by disastrously
| mispricing the businesses. There's a lot of business that still
| needs to happen after an IPO and an IPO in and of itself is not
| the goal. If you're running a solid business like Stripe during
| turbulent times keeping your options open is a good idea. We
| haven't seen how the IPO fest of 2020-2021 is going to work out
| for some of those companies if they get cash strapped.
| newaccount2023 wrote:
| well on its way to a $15bln valuation, just a matter of time
| rvz wrote:
| At this point, they might as well do a direct listing. Raising
| more money would just cut their valuation further and as soon as
| they list everyone can dump 20% of their holdings to provide
| liquidity.
|
| But either way, they should have at least IPO'd in 2019, just
| like the rest of the companies out there who raced to the exit
| [0] [1] instead of a 50% valuation cut from $95BN.
|
| [0] https://news.ycombinator.com/item?id=20993919
|
| [1] https://news.ycombinator.com/item?id=31062658
| fbabs wrote:
| overrated company with bad foresight to read the trend. Maybe
| paystack is a terrible acquisition anyways.
| Idiot_in_Vain wrote:
| Raising money now means they probably expect the financial
| industry to go further down.
| jongjong wrote:
| If I was an employee of such company, I would just sell all my
| equity as soon as I got it. I suspect they have no clue how
| insanely lucky they are and how many forces have worked in their
| favor behind the scenes to put them in such fortunate position.
| After such insane winning streaks, it's the less arrogant ones
| who understand their luck who get to keep the spoils.
| steponlego wrote:
| Plan to provide employee liquidity? Is this just a euphemism for
| "paying them?"
| jon-wood wrote:
| It's too allow employees to cash out share options without the
| company having to go public or be sold.
| ZephyrBlu wrote:
| Series I lol. I think the latest funding round I've seen prior to
| this is a Series G, but really anything past D/E seems rare.
| tough wrote:
| Good thing it looks like a 1
|
| Thank romans
| DueDilligence wrote:
| [dead]
| akavi wrote:
| 48% discount from peak valuation (95 G$ in Mar 2021). Ouch.
| nprateem wrote:
| Looks like they tried to time the market and failed. Smells
| like greed to me.
| enahs-sf wrote:
| Steep haircut, but 50% of something still better than 100% of
| nothing.
| nrmitchi wrote:
| That's a fair point, but wasn't that $95B valuation based on an
| ~$500M fundraise _primarily_ to the irish government (as well
| as, I 'm assuming, any funds that had participation rights)?
|
| I'm not saying it doesn't look like a bad drop in valuation,
| but it's not clear that the $95 valuation would have been
| supported by any larger.
| cperciva wrote:
| To be fair, 30 year treasuries have fallen almost as much. Did
| Stripe's valuation drop, or did the long-term value of today's
| cash increase?
| thaumasiotes wrote:
| Doesn't the long-term value of today's cash move in the
| opposite direction of the inflation rate?
| fnordpiglet wrote:
| I think they're referring to net present value of future
| cash is determined by the difference between interest rates
| and inflation discounted over time. As inflation has gone
| up so have interest rates. Cash today is worth more in the
| future, especially if inflation is tamed and you locked in
| a good interest rate on a long dated bond.
| schnebbau wrote:
| 95 Gazillion dollars?!?!?
| jefftk wrote:
| "G" for "Giga", 1e9.
| reikonomusha wrote:
| "giga-dollars" i.e. 1 billion dollars
| lemoncucumber wrote:
| I prefer to use gibi-dollars ($1073741824)
| djbusby wrote:
| I read "Giga Dollars". To remove the ambiguity of Million,
| Billion, Millard, Long Million and Short Million perhaps.
| airstrike wrote:
| Hmm.. but there's no ambiguity in "billion"? There's
| certainly less than in "giga dollars"
| djbusby wrote:
| Billion is different in Short (10^9) vs Long (10^12)
| scale.
|
| See:
| https://en.m.wikipedia.org/wiki/Long_and_short_scales
| airstrike wrote:
| The short scale isn't a thing in English or when talking
| dollars which is implied by the dollar sign in "$95
| billion" and the fact that this is a US company
|
| "$95 billion" simply means $95,000,000,000.00 and there's
| no ambiguity...
| djbusby wrote:
| A thread on HN yesterday regarding Credit Suisse where
| this ambiguity came up. That thread was in English and
| was about US Dollars.
| fnordpiglet wrote:
| Inflations a monster
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