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Stripe might hold off on IPO

13 Sep 2022 05:19 PM

Stripe is a payment processing software firm, it covers various aspects of the sector, which includes a point-of-sale service and an operation that manages recurring invoicing, as well as anti-fraud tools. As we know, e-commerce underwent a boom amid the pandemic so that greatly helped the group. In 2020, Stripe gained an additional 300,000 clients because of the lockdowns.

When a company is listed on the stock market its market capitalisation – the number of shares issued multiplied by the share price – is public knowledge, but private companies are harder to value. According to a valuation report one year ago, the company is worth $95 billion, and keep in mind it was valued at $35 billion in April 2020. The sharp uplift in valuation underlines how much of a lift it received amid the pandemic.

Companies typically prefer to list on the stock market when sentiment is upbeat. The NASDAQ 100, the tech-heavy index, fell to a 20 low in June 2022, due to fears about the possibility of even higher interest rates from the Federal Reserve, as well as worries the global economy is cooling. The NASDAQ has rebounded since, but the wider down trend is still intact. Broadly speaking, the technology sector has relatively high levels of debt, so it could suffer the most in the event of higher rates. Lately, we have seen several high-profile stocks suffer great declines, including Meta platforms – the owner of Facebook, Netflix and even Amazon. Given the bearish sentiment surrounding stocks, and in particular, the tech industry, Stripe might look to hold off on going public for a time being.

Amazon was one of the companies that benefitted the most from the pandemic. Considering its share price has handed back a lot of the gains it made since March 2020, it is possible that Stripe’s valuation has taken a hit too. Some stock market analysts have pointed out that PayPal and Block Inc have similar businesses as they are all involved in payment processing. The share price of Block and PayPal underwent huge growth in the past two years on account of the pandemic, but they have also endured major losses amid the broader market sell-off. The stocks are trading below the pre-pandemic levels which is something that could influence Stripe regarding its potential IPO.

2007 saw the peak in global stock markets prior to the banking crisis, and in that year, there were 268 IPOs, unsurprisingly, there were only 62 in 2008 – when market sentiment was at its lowest point in that era. As equity markets moved into the 2010’s, the number companies going public increased. In 2020, there were 480 IPO’s – the largest number it at least 20 years. The 2021 level surged to 1035. It is no coincidence that equity markets were booming and there was a substantial jump in IPO activity.  Stripe have played their cards close to their chest with regards with financial details, and they have not given an indication of when they will go public but the current investment environment is not ideal so Stripe could well play the wait-and-see game.

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