Strategy Note /
Global

Stripe slashes its valuation; other fintechs are likely to follow

  • Stripe has cut its internal valuation by 28%, to US$74bn, well below the US$95bn level of its last fundraising

  • Listed EM fintechs have been hit by the broad tech rout; shares have declined 32% ytd, with Brazilian names down heavily

  • Digital bank shares have fallen the most so far this year, while digital lenders and investechs have been more resilient

Stripe slashes its valuation; other fintechs are likely to follow
Rahul Shah
Rahul Shah

Head of Financials Equity Research

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Contributors
Rabail Adwani
Rohit Kumar
Tellimer Research
15 July 2022
Published byTellimer Research

Stripe’s valuation adjustment is likely to be the first of many

Press reports indicate that Stripe has cut the internal valuation of its shares from US$40 per share to US$29 per share, equivalent to a US$74bn valuation of the firm. This price compares with the US$95bn firm valuation at which investors bought US$600m new shares in March 2021, and comes after Fidelity (one of the investors in that funding round) cut its valuation of the firm by 9% in March.

Stripe’s board approved the new share price after a so-called 409A valuation exercise, carried out by an independent third party. This is supposed to occur every year, or after a material valuation event, meaning other unlisted fintechs are likely to follow in Stripe’s footsteps. Moreover, with many fintechs still in the cash-burn/growth phase, fundraising rounds will provide investors with further tangible price points. BNPL trailblazer Klarna’s recent round, at a US$6.5bn valuation, represented an 84% reduction on its previous fundraising.

Start-up valuations are well down on last year

As Klarna’s experience shows, the VC investment climate has deteriorated significantly, meaning that realistic valuations are likely to be well below previous levels. At the broader level, we note that EM tech shares are down 36% from their January 2021 peak. The Refinitiv Venture Capital Index (a listed share proxy for US VC fund holdings) is down 59% from its November 2021 peak.

Technology and Venture Capital valuations have fallen this year

Fintechs have not escaped the carnage

Our proprietary database of 100 listed emerging market fintechs allows us to track performance and valuations in real time. The sector is now 38% off its peak, in line with the broader EM tech universe.

Listed EM fintech performance

By fintech sub-sector, price weakness this year has been felt most acutely in the digital banking space, while the shares of lending and investment fintechs have been more resilient.

EM fintech share price performance

By geography, the share prices of fintechs in Brazil have fallen the most, while shares in India and Africa have been less affected by the downturn.

EM fintech share price performance