A few years ago, strong financial markets and a high appetite for risk from investors set the stage for a record year for initial public offerings (IPOs). Then, the Federal Reserve began to hike interest rates aggressively to tame inflation, geopolitical uncertainty picked up, and declining markets kept many privately held companies on the sidelines.
After a long lull, conditions have become more favorable for companies making their public debut. The S&P 500 has hit all-time highs multiple times this year, confirming the bull market in stocks that began in October 2022. In addition, the Renaissance IPO ETF, an index of the largest IPO stocks in recent years, is up 63% since the start of last year.
Image source: Getty Images.
One intriguing fintech on my radar for going public is Stripe. The company first explored an IPO in 2021, but it put these plans on the back burner and raised money privately instead.
Now that conditions are improving, could Stripe become one of 2024's biggest IPOs? Here's what we know about the fintech and where it could go from here.
Stripe has contributed to e-commerce's explosive growth
Chances are you've used Stripe without even knowing it. Founded in 2009, Stripe makes it simple and easy for businesses to accept payments online. The company provides an online payment processing platform where e-commerce companies can easily accept various payment methods.
Before Stripe came along, accepting payments online was a hurdle for many businesses. Complex setups, high fees, and integrating payment gateways into websites were a headache for small businesses just starting out. Stripe simplified the process, making e-commerce more accessible for merchants and customers.
Stripe Terminal also provides card readers and software tools to allow merchants to accept in-person payments. In return for this service, Stripe earns transaction fees of about 2.9%, plus $0.30 for online transactions. For in-person transactions it charges and 2.7%, plus $0.05.
The fintech has evolved its banking-as-a-service (BaaS) offering, giving companies the tools to create bank-like offerings on top of existing infrastructure. One example is Shopify Balance, which gives merchants greater control over their finances, allowing them to manage funds, pay bills, and track expenses all in one place.
The fintech is putting up impressive numbers
Although it's not yet a household name, Stripe is a huge player in the payment processing industry. According to data from Statista, Stripe has an 18% share of the payment processing technology market, which includes payment gateways and buy now, pay later products. With a 45% share of this market, PayPal is the only company with a bigger market share.
In 2023, the company processed more than $1 trillion in total payment volume, a 25% increase from the prior year. For perspective, PayPal surpassed $1 trillion in payment volume in 2021. Not only that, but Stripe was cash flow positive during the year.
Chart by author.
Recent fundraising has it valued $65 billion
Stripe has undergone several rounds of fundraising. Some of its most prominent investors include Elon Musk, Peter Thiel, Max Levchin, and venture capital firms such as Sequoia Capital. According to data from Capital One Shopping Research, Stripe has raised $8.7 billion over 20 fundraising rounds. Most of this fundraising came last year, when the company raised $6.5 billion at a $50 billion valuation.
According to TechCrunch, Stripe and some of its investors agreed to purchase $1 billion in shares from current and former employees earlier this year. The tender offer values Stripe at $65 billion, a 30% increase over the last year.
Will Stripe finally go public in 2024?
Investors have long awaited a Stripe IPO, but they may have to be patient. Stripe first explored an IPO in 2021, but it decided to raise money privately instead.
The company's cash flow is positive, and if it can continue this positive momentum for another couple of years, it could allow for a higher valuation when it finally goes public. With its recent fundraising round from its employee tender offer, the long-awaited Stripe IPO likely won't happen until 2025 at the earliest.
