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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 roun

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 4y ago
Why not go public instead? Wouldn't that be cheaper?
- xoa 4y ago
  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 4y ago
    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 4y ago
      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).
      - elAhmo 4y ago
        In the 2nd case, you are assuming everyone cashes out and avoids missing on growth that would happen. If they keep the stock, or just sell partially (which would most likely be the case for many people, given how much money did Stripe raise to cover tax liabilities), they would be a part of the growth. I still think (and I might be wrong) Stripe put themselves in a corner position, and raising 6.5 billion USD after 13 years of operating to cover this cost seems like something that could definitely have been avoided.
    - waboremo 4y ago
      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.
      - elAhmo 4y ago
        I wasn’t suggesting to wait, rather than to IPO now. Employees could have liquid stock, I was suggesting a scenario where Stripe does the IPO now. If they then wait for the same time until they will wait until Stripe IPOs, the stock would grow to the same level.
    - myhrvold 4y ago
      Stripe made the right move here. Going public is a huge move. You don't want to make a big decision like this because early employees couldn't have cashed out. There are lots of other considerations that come along with an IPO and Stripe is addressing the core problem (early employee liquidity) with a targeted solution. (And yes -- they would've been better off doing two years ago. But timing is hard, and that's not really relevant to their decision now, which is the best at the current time given the past.)
      - elAhmo 4y ago
        I agree that decision to IPO is a massive one and it shouldn't be just driven by this specific situation, which was probably solved in people's best interest. But, they were put into this position for waiting for too long and not going public earlier. I have a feeling that Stripe is doing a classic 'emotional investor' mistake. They are considering their valuation to be 90b+, and see this as 'just 50, it will bounce back', not considering that company went from 0 to 50b. There is no guarantee that it will go above the current valuation, and anything below that is going to be harmful, even for current employees who were saved by this move.
  - spaceman_2020 4y ago
    Market is unlikely to improve. In fact, it might get a lot worse. What happens then?
- deleted 4y ago
  [deleted]
- habitue 4y ago
  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.
  - hgsgm 4y ago
    And you have similar requirements if employees exercise and maybe sell on secondary market and you end up with >2000 shareholders
  - scarface74 4y ago
    And why would I as a potential employee not be hesitant to work for a company that paid me using “equity” unless I knew the business was sound?
    - zamnos 4y ago
      You should be be hesitant! But not everyone wants to work at a large public company and deal with all the bureaucracy that entails, or want to work somewhere risky for the chance to make it big.
      - scarface74 4y ago
        We are talking about Stripe. It’s not exactly a small startup. The “chance” of a startup making it big is infinitesimal. First only 1 in 10 startups “succeed”. And “success” means that the VCs didn’t lose money. By the time you join a late stage startup where some of the risk of completely failure are derisked, the chance of outsized gains are also lower. Besides, then we get back a private company, every year I work without the company going public, I’m even less diversified because I am more dependent on the company succeeding. In a public company, I can derisk every six months. And then there is the issue that Stripe employees have to pay taxes but they couldn’t sell their equity to pay for it. In a public company, you can choose to sell shares to cover taxes.
        deleted 4y ago
        [deleted]
- superfrank 4y ago
  I think this is effectively costing Stripe nothing. I'm skimming over a lot details, but they're taking equity that is owned by employees and transferring that to other investors. It's a way to keep employees happy since they've decided it's not a good time to IPO and they have a lot of employees with thousands or even millions of dollars locked up in illiquid stock.
  - deleted 4y ago
    [deleted]

jonny_eh 4y ago

Why not go public instead? Wouldn't that be cheaper?

xoa 4y ago
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 4y ago
  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 4y ago
    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).
    - elAhmo 4y ago
      In the 2nd case, you are assuming everyone cashes out and avoids missing on growth that would happen. If they keep the stock, or just sell partially (which would most likely be the case for many people, given how much money did Stripe raise to cover tax liabilities), they would be a part of the growth. I still think (and I might be wrong) Stripe put themselves in a corner position, and raising 6.5 billion USD after 13 years of operating to cover this cost seems like something that could definitely have been avoided.
  - waboremo 4y ago
    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.
    - elAhmo 4y ago
      I wasn’t suggesting to wait, rather than to IPO now. Employees could have liquid stock, I was suggesting a scenario where Stripe does the IPO now. If they then wait for the same time until they will wait until Stripe IPOs, the stock would grow to the same level.
  - myhrvold 4y ago
    Stripe made the right move here. Going public is a huge move. You don't want to make a big decision like this because early employees couldn't have cashed out. There are lots of other considerations that come along with an IPO and Stripe is addressing the core problem (early employee liquidity) with a targeted solution. (And yes -- they would've been better off doing two years ago. But timing is hard, and that's not really relevant to their decision now, which is the best at the current time given the past.)
    - elAhmo 4y ago
      I agree that decision to IPO is a massive one and it shouldn't be just driven by this specific situation, which was probably solved in people's best interest. But, they were put into this position for waiting for too long and not going public earlier. I have a feeling that Stripe is doing a classic 'emotional investor' mistake. They are considering their valuation to be 90b+, and see this as 'just 50, it will bounce back', not considering that company went from 0 to 50b. There is no guarantee that it will go above the current valuation, and anything below that is going to be harmful, even for current employees who were saved by this move.
- spaceman_2020 4y ago
  Market is unlikely to improve. In fact, it might get a lot worse. What happens then?
deleted 4y ago
[deleted]
habitue 4y ago
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.
- hgsgm 4y ago
  And you have similar requirements if employees exercise and maybe sell on secondary market and you end up with >2000 shareholders
- scarface74 4y ago
  And why would I as a potential employee not be hesitant to work for a company that paid me using “equity” unless I knew the business was sound?
  - zamnos 4y ago
    You should be be hesitant! But not everyone wants to work at a large public company and deal with all the bureaucracy that entails, or want to work somewhere risky for the chance to make it big.
    - scarface74 4y ago
      We are talking about Stripe. It’s not exactly a small startup. The “chance” of a startup making it big is infinitesimal. First only 1 in 10 startups “succeed”. And “success” means that the VCs didn’t lose money. By the time you join a late stage startup where some of the risk of completely failure are derisked, the chance of outsized gains are also lower. Besides, then we get back a private company, every year I work without the company going public, I’m even less diversified because I am more dependent on the company succeeding. In a public company, I can derisk every six months. And then there is the issue that Stripe employees have to pay taxes but they couldn’t sell their equity to pay for it. In a public company, you can choose to sell shares to cover taxes.
      - deleted 4y ago
        [deleted]
superfrank 4y ago
I think this is effectively costing Stripe nothing. I'm skimming over a lot details, but they're taking equity that is owned by employees and transferring that to other investors. It's a way to keep employees happy since they've decided it's not a good time to IPO and they have a lot of employees with thousands or even millions of dollars locked up in illiquid stock.
- deleted 4y ago
  [deleted]