Digital payments processor Stripe has taken its first major step toward a stock market debut by hiring a law firm to help with preparations, people familiar with the matter told Reuters on Thursday.
The most valuable private company in Silicon Valley, valued at $95 billion, has sat out this year’s red-hot market for initial public offerings (IPOs), using private tender offers to allow some of its existing investors and employees to cash out their holdings.
Remaining private has enabled Stripe to keep financial details such as revenue and profitability under wraps. Yet this has also deprived it of using its shares as a publicly traded currency to help finance acquisitions and to incentivize employees.
Stripe has tapped Cleary Gottlieb Steen & Hamilton LLP as a legal adviser on its early-stage listing preparations, the sources told Reuters. There has been no decision on the timing of the stock market debut, and the next step would be the hiring of investment banks later this year, the sources added. The listing would be unlikely to happen this year, two of the sources told Reuters.
Stripe is considering going public through a direct listing, rather than a traditional IPO, because it does not need to raise money, said two of the sources, cautioning that those plans could change.
The sources requested anonymity because the deliberations are confidential. Stripe and Cleary Gottlieb declined to comment to Reuters.
Irish brothers Patrick and John Collison formed the company in 2010. Stripe processes hundreds of billions of dollars in transactions every year for millions of businesses worldwide. Its list of clients includes Alphabet’s Google, Uber, Amazon.com, and Zoom Video Communications. Early investors include Elon Musk, Peter Thiel, and Google’s venture capital arm.
Stripe’s breakneck growth could result in it challenging Chinese technology giants Ant Group and ByteDance, whose valuations are close to $200 billion, for the title of world’s most valuable startup by the time it goes public.
John Collison told Bloomberg Television in an interview last month that Stripe, which has headquarters in both Dublin and San Francisco, may go public one day but that there were no current plans for a listing.
There’s no shortage of peer-to-peer digital payment apps; in 2017, Zelle joined the ranks of services like PayPal and Venmo as a simple way to send and receive money via your mobile device. Unlike the alternatives, though, Zelle is backed by hundreds of banks and directly transfers money between accounts in minutes.
That speed – and its status as the “official” digital payment system built into many banking apps – makes it a target for criminal activity, which has led some experts to question the app’s overall safety.
Zelle is safe if you know who you’re sending money to
Zelle was built by banks and was engineered to be safe. “Zelle is safe because it uses data encryption which offers users increased protection. From a privacy perspective, it’s safer than alternatives, like Venmo and Cash App, since it’s harder for scammers to access users’ personal information,” said Nishank Khanna, chief marketing officer at Clarify Capital.
But some well-publicized incidents of fraud are a cause for concern, and Zelle’s consumer protection isn’t especially robust if things go wrong.
The biggest drawback of Zelle is that it doesn’t offer fraud protection for authorized payments. In other words, if you purchase something online and use Zelle to pay for it, you have no recourse if you never receive the item you paid for.
For example, if you use Zelle to purchase an item from Craigslist, and it turns out you were scammed, Zelle won’t refund you. Thus, Zelle advises that you only use the service to pay people you absolutely know and trust.
Ted Rossman, a senior industry analyst at CreditCards.com said, “The key with Zelle is to only send money to people you know and trust. Once the money is sent, it’s gone. There’s no pending status, no chargeback mechanism, no buyer protections of any sort. If you send money to the wrong person, you’re basically at the mercy of that stranger to send it back.”
In fact, some criminals try to capitalize on that. “Some scammers deliberately encourage you to pay them via Zelle with the intent of stealing your money. If someone you don’t know is requesting a payment via Zelle, I’d suggest declining,” Rossman said.
“Zelle’s ease-of-use can also make it possible for malicious parties and fraudsters to use social engineering to acquire Zelle credentials,” said Tom Kelly, president and CEO of consumer privacy company IDX. Social engineering is when a scammer lies about their identity or goal to trick victims into giving them personal information.
Criminals have used social engineering to contact victims and request the two-factor code that Zelle requires to set up accounts. In situations like this, criminals can easily set up a Zelle account on their own device using a victim’s credentials.
Payments company Stripe on Sunday said a new funding round had valued it at $95 billion, leapfrogging it above Elon Musk’s SpaceX and delivery app Instacart in valuation terms.
Stripe raised $600 million in its latest round of funding from investors including Allianz X, Sequoia Capital, and Ireland’s National Treasury Management Agency (NTMA), the company said in a statement.
The online payments processor was previously valued at $36 million, and has now tripled its worth in less than a year.
Stripe’s customers include Zoom, Salesforce, Lyft, Deliveroo, and Amazon.
The latest funding would not only allow the company to expand in Europe, but also hire 1,000 more people in its Dublin office over the next five years, and support launches in Brazil, Indonesia, and India later this year, the Financial Times reported Sunday.
Dhivya Suryadevara, Stripe’s chief financial officer, told Insider’s Matt Weinburger on Sunday that she’d been “struck by how capital efficient the business is” since joining the company, adding that the new funds will go into growth and expansion in Europe.
Stripe has been boosted by the rise of online shopping during the pandemic, such as for delivery services like Deliveroo, but Suryadevara said the shift had already begun before the pandemic hit.
“It’s a long-term trend that’s been accelerated in the last year, but it’s early days for e-commerce,” she said.
The UK government said February 8 it plans to regulate these kind of services, after a report produced by the financial regulator’s former chief, Christopher Woolard argued that “buy now, pay later” schemes could be “harmful” if left unregulated.