If you want to know how to buy Stripe stock, this article reveals a lot of aspects to consider before thinking buying Stripe stock.
Stripe, like PayPal and Cash App, is an online payment processing platform.
It is not a public company, so you cannot buy Stripe stock.
Most investors expect an initial public offering (IPO) soon. Here are tips on buying Stripe stock when that happens.
First, this company has paid $25+ million to members:
Why Buy Stripe Stock
Stripe is an exceptionally successful startup that has grown into a large business.
Stripe has increased in value from $5 billion in 2015 to $95 billion or more in 2021.
The online payment market has grown substantially in recent years.
Over 400 million users take advantage of the convenience of payment through these apps each month.
If PayPal is any indication, you could stand to make a lot of money.
If you had invested $10,000 in 2002 when PayPal had its IPO, your investment would be worth over $165,000 now.
How to Buy Stripe Stock
To buy Stripe stock, Stripe will have to become a public company.
When a company does this, it offers shares, or ownership, in the company to the public via one or more stock exchanges.
The stock owners then receive dividend payments and realize profits or losses from the increase or decrease in the value of the stock.
Before a company can offer an IPO, it must fill out paperwork and otherwise qualify with stock exchanges and the Securities and Exchange Commission.
Once a company goes public, it must abide by regulations, like routinely reporting about its earnings.
To buy stock in the Stripe IPO, you must submit a request to participate.
You will submit how many shares you want to purchase.
However, you may not be allocated the full number of shares requested.
Once you successfully buy shares of Stripe in the IPO, you must wait to sell them, usually about 90 days.
It can be difficult to do due diligence for an IPO.
Due diligence is investigating the financials and business strategy of a company you want to invest in.
Even if you know everything there is to know about the electronic payment system market, you still need to do due diligence on Stripe before investing.
The best source of information will be the prospectus.
A prospectus is filed with the Securities and Exchange Commission when a company registers.
The prospectus provides the following information:
- Stripe’s background and financial performance
- The number of shares Stripe is offering for exchange
- People and banks involved in the IPO
This is essential information in determining when to invest in Stripe and how many shares to buy.
Performance of Stripe
Stripe has performed very well.
In 2021, it was valued at $95 billion in its series H funding round.
This is a massive increase over its 2020 series G funding valuation of $35 billion.
Stripe has been successful for over 10 years.
From its initial seed capital funding of $20 million, Stripe has consistently increased in value.
Unlike other payment services, Stripe accepts credit cards, Bitcoin, Android Pay, and Apple Pay.
It continues to increase its capabilities, including integrating with multiple platforms like Shopify and WordPress.
All About Brokers
To buy Stripe stock in an IPO, you will need to go through a brokerage.
Brokerages often have several requirements for which clients are allowed to buy IPO stock to ensure its “best” clients get to buy the stock.
Some of these requirements are:
- A sizeable amount of assets at the brokerage, over $100,000 to $250,000 or more
- A minimum number of recent trades
- A completed questionnaire for the underwriters
The purpose of having requirements for clients to purchase stock in an IPO is to foster a stronger relationship with those clients and to incentivize them to do more business with the brokerage.
Know the Risks for Investing in Stripe Stock
There are risks for investing in Stripe stock.
One risk is that the stock will not increase in value, but this is unlikely given Stripe’s success in raising funding.
Another risk is that you must hold stock bought during an IPO for at least 90 days.
The stock may increase and then dip when you are allowed to sell it.
Moreover, there is a lot of buzz around the idea of Stripe doing an IPO.
This might artificially drive up the price of the stock.
Do Fundamental Analysis
When doing due diligence before buying Stripe stock, you will perform a fundamental analysis.
This is considering factors that affect the value of Stripe stock.
One of the outside factors that affect the price of Stripe stock is the state of the economy.
If the economy is strong, then Stripe is more likely to succeed, so the stock is worth more.
Another factor that affects the value of Stripe stock is the industry.
If there is too much competition when Stripe does its IPO, its stock will not be worth as much.
Also See: How to Buy Hulu Stock.
Do Technical Analysis
You will also perform a technical analysis when considering buying Stripe stock.
With technical analysis, you will use historical data to determine the value of Stripe stock.
Since Stripe has not been traded, you do not have historical stock price data for technical analysis.
Moreover, you do not have historical volume data.
Therefore, technical analysis will be difficult.
You could use historical data like the funds Stripe was able to raise for investment while it was a private company.
Comparing this to competitors and then looking at their historical price and volume data may be meaningful.
However, technical analysis conclusions about the value of Stripe stock should be taken with a grain of salt.
Machine Learning Predictions
People use artificial intelligence in the form of machine learning to predict the value of Stripe stock.
In this way, your due diligence can be automated.
There are many different types of analysis that can be performed using machine learning.
People spend their entire careers developing this technology.
You may need to seek out an expert for assistance or advice using machine learning predictions.
Again, this company has paid $25+ million to members:
Share dealing is the traditional view of trading in Stripe stock.
You buy the stock when it is low in hopes that it will increase in price and you will sell it at a maximum price.
Moreover, share dealing involves making a profit from Stripe stock in the form of dividends.
Dividends are the shareholder’s shares in profits.
They are paid quarterly or upon the companies’ discretion.
CFD trading is trading in a contract for differences.
In this, the investor does not actually own the stock.
Instead, a CFD broker owns the stock.
You make money on CFD trading by timing your trade exit to be when the stock is worth more than it was when you entered the contract.
This enables you to make a profit without having to put out the cash to buy the stock initially.
It is useful if you do not have the cash or want to minimize your risk.
Valuation for a Private Company Like Stripe
It is hard to value Stripe because it is a private company.
Therefore, it does not release its financial data to the public.
However, Stripe has raised private equity funds many times over the years.
The most recent was early in 2021, at which time it was valued at $95 billion.
But how was it valued? It is important to know this to understand if the value is inflated or realistic.
Three ways to value a private company are:
- comparison to public competitors
- discounted cash flow analysis
- historical information in the financial technology industry
Participating Before the IPO
You can gain ownership in Stripe without buying stock.
While Stripe is private, you can participate in a private equity fund to gain ownership in Stripe.
There are a lot of benefits to buying ownership, or equity, in Stripe before an IPO.
You are likely to receive higher returns on private equity.
Moreover, when Stripe goes public, you will receive shares for your equity without competing with other investors.
Competitor Payment Companies Performance
Stripe has several competitors in the electronic payment industry.
The biggest ones are PayPal and Cash App.
Even Facebook has a way to send money to people with Facebook Pay.
Other competitors are Venmo, Zelle, Apple Pay, and Google Pay.
Most of the payment apps are doing well.
Stripe, however, exceeds the performance and tops lists more often than most, except maybe Paypal and Cash App.
Stripe is flexible and powerful.
It can send many denominations and works well for everyone from individuals to businesses.
Even though Stripe is private, there are some important financial indicators to consider if you have access to the right information.
This is likely the information used to value Stripe during private equity funding rounds.
The most important financial indicators are revenue, operating income, net income, owner’s equity, and operational cash flow.
IPO Investing Apps
There are several apps used to invest in an IPO.
The best ones are:
Each of these trading apps has different requirements for who can participate in an IPO.
Moreover, their fees differ.
Take into account how much you plan to invest, and which ones best suit your needs when you choose one to invest in Stripe.
Timing an IPO
There are a few ways to gauge whether Stripe is considering going public.
One way is if they start following the Securities and Exchange Commission’s rules for recordkeeping and accounting.
These rules are very strict and the company must show it can follow them before going public.
Another sign that Stripe might go public soon is if they bring in new executives and advisors with more experience in a public company.
Currently, the two brothers that founded Stripe are still the CEO and President of the company.
However, in August 2020, Stripe recruited General Motors’ CFO for the company.
The CFO would be a key player in an IPO.
Active Investments vs. Passive Investments
If you want to engage in the active investment of Stripe’s stock, you will personally buy and sell the stock on a more frequent basis.
Doing so will mean taking advantage of short-term increases in the stock price.
If you do not want to monitor the market that closely, then the passive investment would be best.
With passive investment, you usually hold the stock longer.
You may even choose to invest in a mutual fund that passively invests in Stripe instead of investing in Stripe directly.
These mutual funds are usually more successful and have consistent returns.
Stripe Stock FAQs
When Should I Buy Stripe Stock?
Buying Stripe in the IPO may be risky.
The price may be overinflated due to hype.
On the other hand, the stock may shoot up in value after the IPO, so it would be best to invest at the IPO.
It will take significant due diligence to time when to buy Stripe stock.
And even with due diligence, you may find that you do not see the returns you hoped to see.
What Is FinTech?
FinTech is financial technology.
It is the main industry for Stripe.
FinTech companies like Stripe specialize in technology for the financial services sector.
It is a popular industry for investment because it has some of the greatest returns.
Even though you cannot buy stock in Stripe since it is a private company, you may be able to in the near future.
This article gives several tips for deciding whether to participate in the IPO or wait until later.
Moreover, you can participate in private equity investing during the next round of funding.
Again, this company has paid $25+ million to members: