How to Invest in Stripe

Stripe is one of the hottest companies in the startup world. Brothers Patrick and John Collison founded the company in 2010 to process internet payments. Their startup quickly caught the attention of Elon Musk and Peter Thiel, early co-founders of the companies that became payments processor PayPal (PYPL 2.9%). Stripe would attract the attention of several other venture capital investors who saw promise in the company's technology and sent the company's private market valuation soaring.

Stripe has become a leading payment processor for merchants, especially those operating online. Its technology allows them to accept credit and debit cards, process payments from mobile wallets, and use buy now, pay later services. Stripe gets a cut of every payment (a small flat fee and a percentage of the transaction). The company processed $18.6 billion in transactions between Black Friday and Cyber Monday 2023 alone, the best four-day stretch in its history.

The company is growing rapidly as more merchants use its technology to process payments, driving up its private market valuation. Many more investors wish they could own shares of the highly valued private company.

Here's a look at how to invest in Stripe and factors to consider when evaluating the company.

Is Stripe publicly traded?

Is Stripe publicly traded?

As of late 2023, Stripe had yet to complete an initial public offering (IPO). Since it's not publicly traded, you can't buy shares of Stripe on a stock exchange.

Will it IPO?

Will Stripe IPO?

As of late 2023, Stripe didn't have an IPO on the calendar. However, the company's co-founders reportedly told employees it would decide whether to go public within the next year. The company is choosing between a direct listing or letting employees sell shares on a secondary market. It hired investment banks Goldman Sachs (GS 1.79%) and JPMorgan Chase (JPM 0.06%) to give it advice on the best path forward.

The company raised $6.5 billion in capital from investors in early 2023 to provide liquidity to employees to exercise their stock options. The capital raise means the company likely doesn't need to go public anytime soon to provide liquidity to its employees.

How to invest

How to invest in Stripe

Although Stripe isn't a publicly traded company, its shares have been available on secondary platforms like EquityBee and Forge Global (FRGE 0.52%). The online platforms enable employees working for a start-up to exercise their stock options and get shares in a company before its IPO, which they can sell to other investors.

The platforms allow accredited investors (i.e., people with a high net worth or a high income) to invest in venture capital-backed start-ups. Accredited investors on EquityBee, for example, fund employee stock options, allowing them to own stakes in private companies at previous valuations. The investors will receive a percentage of the future sales of the options when the company completes a liquidity event, like an IPO.

Alternatives

Alternative ways to invest in Stripe

Although Stripe isn't a publicly traded company, several competitors operating similar business models trade publicly. Notable fintech stocks that compete directly with Stripe include:

1. Block (SQ 2.32%): Block has a growing financial services platform, including Square, which processes payments.
2. PayPal: PayPal is one of the world's largest payment processors. Almost 80% of the largest retailers in North America and Europe accept PayPal.
3. Adyen (ADYE.Y -1.57%): Adyen offers merchants many ways to process payments.

Investors interested in Stripe might want to take a closer look at publicly traded options while they await its potential IPO.

Should I invest?

Should I invest in Stripe?

While you can't invest in Stripe yet, here are some factors to consider about the company if it does complete an IPO in the future.

Profitability

Is Stripe profitable?

According to Bloomberg, Stripe isn't yet profitable. The company's earnings before interest, taxes, depreciation, and amortization (EBITDA) were negative $80 million in 2022. The company also burned through more than $500 million in cash in 2022, according to an article by The Information.

While Stripe is still losing money, many competitors are solidly profitable. Payment behemoth PayPal produced $3.8 billion of operating income in 2022. Meanwhile, it expects to generate $5 billion in free cash flow in 2023. The company is generating more cash than it needs to fund its operations, so PayPal is using most of its free cash flow (an estimated 75% in 2023) to repurchase stock.

Block and Adyen are also profitable. Block produced almost $477 billion of adjusted EBITDA in the third quarter of 2023. Meanwhile, Netherlands-based Adyen generated 320 million euros ($344 million) of adjusted EBITDA in the first half of 2023.

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Revenue

Stripe's revenue

According to Bloomberg, Stripe produced about $14.4 billion in gross revenue in 2022, a 23% increase from $11.7 billion in 2021. That's a noticeable slowdown from the surge in revenue it saw during the pandemic. Stripe's revenue almost quadrupled in 2020 and jumped more than another 60% during the following year.

While Stripe is still growing its revenue briskly, it has slowed considerably. On the other hand, some rivals expect to deliver a high sustained growth rate. For example, Adyen expects to increase its gross revenue by at least 20% annually through 2026.

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