Stripe Is Raising $6B to Resolve Employee Tax Issue
newcomer.co
newcomer.co
(Paywalls are ok on HN if there are workarounds. By 'hardwall' I mean there isn't an easy workaround. The latter are not ok on HN—people need to read the articles to be able to substantively discuss the information in them!)
https://hn.algolia.com/?dateRange=all&page=0&prefix=false&so...
"The funding round is one of the largest venture rounds in a private technology startup ever. OpenAI’s Microsoft deal, if it ends up totaling $10 billion, would be larger, but it’s a different sort of animal. This Stripe round is humongous by any standard.
The money is going toward helping early Stripe employees exercise their restricted stock units before they expire and then toward organizing a tender offer for employees to sell shares.
While the tax bill has been estimated to total about $3.5 billion, much of the excess money will be used to allow employees to sell their Stripe shares.
The funding round is not intended for Stripe’s corporate coffers."
I get into the debate around the appropriate valuation later in the story.
Received this in my inbox 2 hours ago:
> Over the past few years, card networks have increased the total fees that Stripe pays for card processing. Because of these costs, starting June 1, Stripe’s additional fee for international card transactions will change from 1.0% to 1.5%. There’s no change to our standard 2.9% + $0.30 pricing for US card transactions
> Whether you win or lose a dispute, card networks charge Stripe a fee in either case. To cover these costs, starting June 1, Stripe will no longer return the $15 dispute fee for successfully contested disputes
Tangentially, I think the card networks in general are not going to look great when the Fed's FedNow instant payments go live this summer. If you can get instant settlement up to $100k in value for a few pennies, that's a lot of volume that is going to move to new rails to avoid the ~3% tax (which is a tax on most of the current digital economy). Sure, there is a lot of value to consumers in the ~30 day float, but if merchants start passing the CC fees on (which they are legally allowed to do, and many already do)...
Digital wallets might be the next step (Pay with Stripe/Paypal/ShopPay/whatevs) but there ain't much moat there either. Optimistically, it's nice to see payments moving to what it should've always been: a utility, and priced accordingly. The US joins 55 other countries with instant payment networks. Hurray!
Like some Euro banks have API's to do fund transfers.
[1] https://en.wikipedia.org/wiki/Payment_Services_Directive
[2] https://www.fiserv.com/en.html
(not in payments, but adjacent at a fintech)
This is and will be huge.
With this the US is following India's pioneering UPI payment infrastructure and Brazil's (PIX) in realtime payments.
Once FedNow launches, there really wouldn't be much use for card payments really and definitely no need for cryptocurrencies at all.
Is it good that people are encouraged to spend more with certain financial instruments? ¯\_(ツ)_/¯
[1] https://thepointsguy.com/credit-cards/american-express/more-...
[2] https://www.hostmerchantservices.com/articles/american-expre...
The $15 dispute fee is by far my largest expense.
I really wish I could set an option on my account to auto-refund any customer who disputes and not have to pay the fee.
https://support.stripe.com/questions/protecting-your-busines...
Looks like they waited long enough to attempt a liquidity event that employees are facing their options expiring?
Why would a publicly and a privately traded company react fundamentally different to the economy? What macro factors are you referring to, that fundamentally influence one but not the other?
For one, selling shares in a private company is much harder (if not impossible, barring buybacks), so that's why valuations are relatively stable (and ideally only go up, until an IPO). So by definition, private equity is less volatile than the public markets.
Secondly, private investments are a fairly well-studied hedge against inflation (due to return horizons being relatively low and return multipliers being relatively high) and also do well during, and immediately after, a recessionary period (where public markets generally do poorly).
(But maybe I misspoke, they are both, of course, affected by macro factors, but the effects are probably much more attenuated in private markets.)
I still think Stripe is really thriving in terms of products, services, and customers.
However, when even really good news (somebody wants to give them a whole lot of money!) is interpreted as bad news (not at as high of a valuation as before), it's hard to imagine them not having a hard time.
They are raising money to help their employees liquidate, that’s the story (recommend reading)
Stripe faces $3.5B tax bill as employees' shares expire - https://news.ycombinator.com/item?id=35058846 - March 2023 (30 comments)
It sounds like Stripe is going to declare a qualifying event which will convert outstanding RSUs into shares which will bring along with it a major tax implication for the RSU holders, who would be in a really tough spot if they got a windfall of totally illiquid Stripe equity. So Stripe is going to buy shares to facilitate tax withholding, for which they need the $$ they are raising.
I may have misread, but I think OP implied everyone would have been better off with options. There were a few years when RSUs were the craze, but they mostly screw holders.
Other reports have said that Stripe is raising to cover RSU tax bill that would come from letting them vest in order to prevent the RSU from expiring.
That said ISOs have similar risk but additionally you could lose whatever you paid to exercise and also you could incur AMT which complicates your tax return quite a bit.
Now, like all income if you set your withholding incorrectly you can owe at the end of the year.
> In the presentation, Stripe said it generated $14.3 billion in revenue as it processed $816 billion in payments volume last year. The company’s so-called transaction margin before losses — a measure of net revenue — rose to $3.17 billion, or 0.38% of total volume. That compares with 17 basis points for rival Adyen NV, according to the presentation.
If Stripe had notable profits or profit margins, I assume they would have shown them off in a presentation to potential investors.
They still have to room to grow, yes, but they should be able to fund a move like this on their own, just MHO. Maybe they grew too fast?
https://news.ycombinator.com/newsguidelines.html
I know it's annoying when a comment is wrong and the correct information is in the article, but it's enough to provide the correct information. Empty putdowns etc. just add poison, not information.