This publication looks hardwalled. Is there an alternative URL?

(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—we need to be able to read the articles to discuss the information in them.)

https://hn.algolia.com/?dateRange=all&page=0&prefix=false&so...

https://news.ycombinator.com/item?id=10178989

I found https://www.reuters.com/article/us-stripe-funding-breakingvi... which has no paywall.

Related: Stripe Faces $3.5 Billion Tax Bill as Employees' Shares Expire https://archive.is/5jsvT

Looks like they waited long enough to attempt a liquidity event that employees are facing their options expiring?

Posted and discussed here: https://news.ycombinator.com/item?id=35058846. I've re-upped that thread since it has an article people can read.

Why does everyone keep saying they are not profitable?

They are raising money to help their employees liquidate, that’s the story (recommend reading)

Is that true? My reading is that there are two separate reasons for raising the money. They want $600 million to buy employee stocks so that the employees aren't foisted with a big tax bill, but they've also got a separate $2.5 billion tax bill that they need to cover unrelated to the RSU stuff.

The most interesting thing here is that this is a down round (n.b. employee liquidations should've been priced into prior valuations). Imo, if they try to IPO this year, they're going to get wrecked. Stripe has been one of YC's most winningest startups (if not the most winningest—on paper, of course), so it's worrying to see what is potentially the beginning of the end.

Kinda like WeWork or Uber. They'll still chug along but lose a lot of their shine. Though I still love the ambience of WeWork offices and the convenience of Uber/Lyft on occasions when I use it.

What is interesting about that? Amazon is down 30% yty. Why would Stripe not take a hit?

It seems they're in for a lot worse than that. Could be wrong though.

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.

Raising a down round when you're private is fundamentally different than the "market being down" when you're public ($AMZN is down due to macro factors). It means a few things: old investors are diluted which is very painful, employees are diluted which means you'll lose talent, you're most likely desperate for cash which shows cashflow/war chest problems, and finally, the IPO strike price will most likely be even lower than expected.

I don't understand.

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?

> Why would a publicly and a privately traded company react fundamentally different to the economy?

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.)

To add: Everyone gets extra nervous after a down-round, or so I've heard. So even trivial things become magnified and causes suspicion, tension, etc...

Related ongoing thread:

Stripe faces $3.5B tax bill as employees' shares expire - https://news.ycombinator.com/item?id=35058846 - March 2023 (30 comments)

I wonder if recent price increases are related to this tax bill.

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

Did the cost to process foreign cards increased by 50 basis points?

    > 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

Why were they covering the dispute fee in the past, then?

Nah, Stripe just paid a bunch of folks with funny money everyone is kicking the can on making real and this is the cost of that strategy due to the mechanizations around equity comp.

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 54 other countries with instant payment networks. Hurray!

As for Digital wallets, if Apple would let developers use NFC other apple certified cards and apps it would be already happening tap to pay with digital wallets.

Will this come with an API so anyone can integrate with it or will that be up to the banks?

Like some Euro banks have API's to do fund transfers.

The EU has legislation requiring such interfaces [1]. The US does not. With that said, you're likely be able to go to a technology provider (FiServ is a big one [2], but there are many in the space) who will get you plugged in.

[1] https://en.wikipedia.org/wiki/Payment_Services_Directive

[2] https://www.fiserv.com/en.html

(not in payments, but adjacent at a fintech)

> 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.

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.

Maybe, I have read that credit cards result in people willing to pay higher prices. Which is supposedly why most retailers, especially large ones, do not offer discounts for debit cards, even though the transaction costs would be a lot lower.

People are willing to spend more (Amex is famous for marketing this as to why their interchange fees are reasonable [1] [2]), not necessarily pay higher prices.

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...

Yes, spend more is more accurate than higher prices.

I sell items that cost $2.

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.

Do you refund upon receiving an early fraud warning?

https://support.stripe.com/questions/protecting-your-busines...

Stripe is still taking 2.9% + 0.30 even if you refund in any situation. All these fees make selling low cost items prohibitive.

I wrote the story and would love if you would subscribe to Newcomer. A little additional context on the round from the story:

"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.

I am finding it very surprising that Stripe is not profitable.

Do you have evidence for that? Even if they’re profitable, they may not have enough on hand or it may make sense to raise this money to pay off the expiring options

The Bloomberg article linked in another comment says:

> 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.

If Stripe had offered 83(b) and issued cash bonuses to cover exercise costs, would this tax issue been avoided?

AFAIK most of the pressure is around RSU expiration, not options. So - no (Unless we're talking about Stripe changing this equity program even further)

But RSUs are shares and this don’t expire? ISOs and Non-quals expire after 10 years typically.

RSUs do expire if they do not have the qualifying events to convert to shares in time, with a window similar to option expiry.

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.

Huh, did Stripe move to RSU-based packages earlier than typical? So they would have had to move from options to RSUs in, like, year 4 of the company? Didn't Facebook not do RSUs until year 6?

I think that’s right. If the RSUs had a 7 year window and they are expiring this year it means they started granting them in 2016.

Yes. Or if they permitted a legitimate secondary market.

RSUs are not eligible for an 83b election.

> RSUs are not eligible for an 83b election

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.

The article is a bit of a mess as it says “exercise restricted stock units” which is not a thing.

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.

How do RSUs mostly screw holders compared to options? I don't have a lot of experience with options, but they generally seemed riskier.

With RSUs, if you are taxed on receiving them in any way and yet they are not liquid or you decide not to liquidate them, then the RSU price could go to zero and you’ve lost more than everything because you can’t necessarily recoup the taxes.

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.

That’s not how it _should_ work. RSU grants are normal income. Taxes should be withheld as such by the granter. Which is the assumed reason Stripe is raising money. Because they are on the hook for withholding and must pay that bill in cash.

Now, like all income if you set your withholding incorrectly you can owe at the end of the year.

Paywall: Archive.is and Archive.org are unable to view full version.

Dang, this smells like trouble. If Stripe is not profitable right now (since they're raising money again) I'm not sure if they will ever be.

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?

A company can be very profitable but still not have $6 Billion cash on hand for a one time expense, and even if it does have that cash in the war chest, every dollar going to this is being pulled away from productive investments.

Did you bother to read the article?

"Please don't comment on whether someone read an article. "Did you even read the article? It mentions that" can be shortened to "The article mentions that.""

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.

Sorry

What's the point of posting something behind a paywall?