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While useful for some deals, Stripe's private status becomes a liability for acquiring large public companies. Using non-liquid, hard-to-value private stock as payment is less appealing for sellers, creating significant pressure for Stripe to go public to fund future growth through M&A.
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Companies like Stripe are avoiding IPOs because the private markets now solve the two main historical drivers: access to capital and employee liquidity. With annual secondary tenders and vast private funding available, the traditional benefits of going public are no longer compelling for many late-stage startups.
While mega-unicorns like Stripe have private liquidity options, their failure to IPO removes a crucial market benchmark. This uncertainty about public market appetite poses a significant liquidity threat to the next 25-50 companies in an LP's portfolio, which lack the same private demand.
The rationale behind high-priced acquisitions isn't the target's standalone worth, but its potential to increase the acquirer's valuation. Stripe's purchase is justified if it boosts Stripe's own value by a certain percentage and prevents a competitor from gaining a strategic asset.
Extreme volatility in public tech stocks, where market caps can swing wildly disconnected from performance, incentivizes successful late-stage companies like Canva and Stripe to delay IPOs. This directly worsens the VC industry's liquidity crisis by trapping capital for longer.
Top-tier private companies like Stripe and Databricks are actively choosing to delay IPOs, viewing the public market as an inferior "product." With access to cheaper private capital and freedom from quarterly scrutiny and activist investors, staying private offers a better environment to build long-term value.
Private companies like Stripe can make massive, long-term acquisitions without the immediate scrutiny and short-term stock price impact they would face as a public company. This allows for bolder, more strategic moves.
Top companies like Stripe or SpaceX can stay private forever by using robust secondary markets to provide liquidity to employees and investors. This allows them to focus on long-term growth without the burdens of public company reporting and quarterly profit pressures.
Stripe, a high-growth private company, is attempting to acquire PayPal, a larger but slower-growing and undervalued public competitor. This move, executed with PE firm Advent, aims to dramatically increase market footprint by acquiring assets at a low multiple, despite the risk of diluting Stripe's own growth rate and adding immense operational complexity.
By choosing to stay private, Stripe missed the opportunity to use its stock as a powerful currency for acquisitions. This prevented it from consolidating the fintech market and achieving the kind of generational dominance Meta built by acquiring companies like WhatsApp with its public shares.
The process of going public establishes a clear market price for a company, an act of 'price discovery.' This transparency, combined with the discipline of quarterly reporting, can make a company a more attractive and straightforward acquisition target, as seen with Slack.
