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Ask HN: Why does Stripe need $4B?
The Information reported [1] Friday that Stripe is trying to raise $4B at a $55B valuation for “a huge tax withholding bill that comes due when it modifies employees’ stock grants that are set to expire before a potential public listing”.
I did a bit of research, but couldn’t figure out what sort of tax laws are at play here? Why is Stripe looking at such an enormous bill, and hypothetically what could happen if they can’t raise all the money?
[1] https://www.theinformation.com/articles/inside-stripes-55-billion-pitch-to-investors
- joneholland 4y agoThis is why it’s so crucial to do double trigger vesting.
- umeshunni 4y agoI think it is double trigger, except that these old RSUs will expire soon.
- puddingpop 4y agoThey are double-trigger (source: I am a Stripe RSU holder). However, they also have an expiration date. The expiration provides the "substantial risk of forfeiture" that the IRS requires in exchange for not taxing the RSUs at the time you receive them.
- itake 4y agoMy understanding is this is a problem because they are double trigger. If they weren’t double trigger there would be no issues
- sbolt 4y agoAnyone have a link without a paywall?
- OJFord 4y agoIdk about the tax but this probably a relatively easy raise, it's only not debt because they don't want to carry that into potential IPO?
- dilyevsky 4y agoFrom what I heard no such thing as “easy raise” rn
- OJFord 4y agoWell 'relatively', what I mean is it's still Stripe right, I'm no insider but I'm sure they'd have no trouble raising it as debt on decent almost traditional/established company ish terms. It's not the same as random fledgling startup seeks 10%.
- toomuchtodo 4y agohttps://www.ft.com/content/9b6981cf-7444-4057-9791-b40ef1cdb5a0 https://www.ft.com/content/9b6981cf-7444-4057-9791-b40ef1cdb... https://archive.is/2sJfX https://archive.is/2sJfX > In the case of payments group Stripe, RSUs worth millions of dollars will start expiring from 2024 and risk being forfeited unless the company buys them out, changes the terms of the awards or launches an IPO. > Employees face a personal tax liability when RSUs vest. But staff are unable to sell any of these shares without the company launching a flotation. To get around the problem, Stripe wants to withhold a portion of the stock equivalent to the tax liability from employees’ awards. Separately, it plans to sell stock to investors, using the money raised to pay the employees’ tax bills and buy up any stock they wish to sell. > Stripe intends to raise enough to cover the tax bill associated with the RSUs handed out to many of its 8,000 employees since 2017, and will hold back some of the value of employees’ shares as compensation, according to a person familiar with the matter. > “Stripe has realised they have to help the employees out,” said Glen Kernick, Silicon Valley leader at valuations provider Kroll. “When they [RSUs] vest, that’s a taxable event. As an employee, you now own the shares and owe tax but you don’t have the ability to pay your tax bill by selling shares. That’s obviously viewed as a hardship.” TLDR stripe needs cash to pay taxes to provide employee liquidity if they don’t IPO, and this ain’t a great macro to IPO Tangentially, private equity in the tech startup space on the secondary market is currently transacting at a ~40% discount.
- adam_arthur 4y agoThey should've IPOed when valuations went into massive bubble territory in 2020/2021... have to wonder what kind of logic they were using to wait so long. If you can IPO at a ~100x sales multiple, what more do you really need? Hard to feel sorry for those that chose to stay private for a decade+ while the getting was good
- deleted 4y ago[deleted]
- dilyevsky 4y ago> have to wonder what kind of logic they were using to wait so long. It’s called greed. And also private money was incredibly cheap so why bother with reporting requirements that come with an IPO