Stripe Co-Founders John and Patrick Collison. Source:

Update: On March 15th, 2023, Stripe announced that it had closed a $6.5 billion funding round at a $50 billion valuation, much of which will be used to facilitate a tender offer for Stripe employees.

Stripe, the payment processing giant of Silicon Valley, is looking to raise some money. If you hold shares in the fintech company, here’s what you need to know:

A Stripe liquidity event is coming

Rumors of a Stripe IPO began circling in 2021, after a $600 million Series H financing round pushed the company’s valuation to a massive $95 billion. Since then, in the midst of a sleepy IPO market and macroeconomic headwinds, Stripe’s plans have evolved. First with the announcement in early 2023 that it would carry out an liquidity event within one year, either in the form of an initial public offering or a secondary sale (i.e. tender offer). And then finally in February 2023, when it seemingly settled on the idea of a private $4 billion fundraising round at a $55 billion valuation led by investment banks Goldman Sachs and JPMorgan.

All of this is to say that a Stripe IPO date is not something you should expect for 2023. But if it does close this $4 billion round, those investors will want to cash out at some point down the road. And going public, either by a traditional IPO or a direct listing, could certainly be in the cards for the years ahead.

Why does Stripe need $4 billion?

Stripe is facing a hefty tax bill associated with the equity compensation of its many employees. Stripe employees are awarded RSUs, or Restricted Stock Units, which are a form of stock that is typically issued by private companies valued over $1 billion, or with a high likelihood of going public. In the case of Stripe, many of these RSUs are set to expire in 2024. If a Stripe IPO were to happen before then, employees would sell their shares and use some of the proceeds to cover their own personal taxes. But given the macroeconomic headwinds of late, and its ongoing search for a new CFO, Stripe just isn’t ready for an IPO. So instead, they’re looking to raise enough money on the private markets and facilitate a liquidity event for their employees along the way.

Meet the double-trigger RSU

To go one step further into Stripe’s RSU situation, let’s take a closer look at the way its shares are structured. Stripe’s equity compensation involves what is known as a double-trigger RSU. For a standard or “single-trigger” RSU, taxes are due when the shares vest, meaning that you owe taxes the day those shares become yours, whether or not you have the funds to cover the taxes due. In a private company, that isn’t going to make employees too happy, since the shares can’t easily be sold to cover the tax bill. In a double-trigger RSU, taxes are not due until both the shares vest and a liquidity event or other change of control takes place, such an IPO, acquisition, tender offer, etc. One final thing to note is that double-trigger RSUs are not actually converted into shares until both events take place. Until then, think of them as units that represent shares—an IOU of sorts.

So to recap, Stripe has thousands of employees with shares coming up on their expiration dates. To retain talent, and bring on new investors, the company is looking to raise capital on the private capital markets and facilitate a tender offer in place of a traditional IPO, before the RSUs expire in 2024.

What is a tender offer anyway?

A tender offer occurs when shareholders of a private company sell their shares to other investors in a liquidity event arranged and controlled by the company.

Smaller scale secondary sales can take place, and there is a growing market for these types of deals, but a tender offer allows for greater control over the cap table.

Stripe wants to ensure that investors taking part in this deal can match the profiles they’re looking for, that it can raise fresh capital, and that all employees participating can get pre-determined terms on their shares.

Unlike buying or selling a shares through a stock market or stock exchange (i.e. the New York Stock Exchange or Nasdaq), a tender offer takes place behind closed doors, and is typically limited to accredited investors or venture capital or private equity funds. Retail investors looking to buy Stripe shares will need to wait for an IPO, should that ever happen.

How do taxes work in a tender offer?

Taxes can be complicated when it comes to RSUs sold in a tender offer. In the case of Stripe’s double-trigger RSUs, the dollar amount vested is recorded as ordinary income in the tax year, and the taxable amount is calculated as the difference between the fair market value (aka, valuation) and the awarded price. Stripe’s internal valuation, for tax purposes, is officially measured by something called Section 409A of the United States Internal Revenue Code. It’s a number that must be determined by a third-party firm.

The selling price of the RSUs in the tender offer will be determined by the 409A valuation. Stripe is going into this $4 billion round with a $55 billion valuation, down from the $95 billion valuation it reached in March 2021. Because of that decrease, it will help employees by reducing taxes owed, potentially keeping some within a lower tax bracket too.

Does this mean that all Stripe employees will be required to sell their shares?

No. Stripe employees will not be required to sell their shares in this tender offer. If that were the case, the round would be for $55 billion, or the entire value of the company, not $4 billion. The purpose of this funding round is to bring in fresh capital from new investors and to facilitate a liquidity event, allowing employees with RSUs expiring in 2024 to cash out. For the remaining shareholder-employees, they will need to wait their turn for the next tender offer or, perhaps someday, a Stripe IPO.

While a tender offer can consist of all shares of a company being bought all at once, it doesn’t always mean that. A tender offer is simply a group sale that is organized by the company with the help of outside broker-dealers and investment banks. Twitter was sold to Elon Musk in a tender offer for 100% of the company, but Stripe is not looking to do that. For what it’s worth, this isn’t even the first time Stripe has facilitated a tender offer. As recently as 2021, $1 billion worth of Stripe RSUs were sold to outside investors (Stripe actually tried to raise $4 billion that time around too).

What’s the difference between a tender offer and a secondary transaction?

All tender offers are secondary transactions, but not all secondary transactions are tender offers.

A tender offer is a sale of company shares that is organized by the company’s management. A good recent example would be the sale of Twitter to Elon Musk. While Twitter was a publicly traded company, the purchase of the shares was organized by the dealmakers, with the pricing and terms being the same for all shareholders. The same logic applies for a private company like Stripe. Tender offers can involve the sale of all shares, or a fraction of the shares.

Secondary transactions can take a number of different forms. As previously mentioned, there are a growing number of secondary share marketplaces popping up where startup employees can find buyers for shares, cashing out when they choose and on their terms. Before a sale takes place, the issuing company typically has a right of first refusal (ROFR) which allows them to buy back their own shares first, before the employee can move forward with an off-market deal. One more thing to consider is that secondary share marketplaces do not allow all equity on their platforms, and you will need to make sure that any equity you have in a startup is not bound by transfer restrictions that would prohibit you from selling on a secondary exchange.

Do you have Stripe employee equity?

If you’re one of the many Stripe employees with RSUs, now is the time to start planning ahead for a tender offer. At Harness Wealth, we specialize in helping startup equity holders manage their taxes and build for a better financial future. Our network of vetted tax, financial, and estate advisors are well-versed in company equity and can help you build a plan that works for your unique needs.

If you have equity compensation in Stripe or a different private company, come to Harness Wealth and get matched with an advisor well-versed in startup equity compensation.

Great advisors strive to build your confidence when making important financial decisions. Find yours.

Tax services provided through Harness Tax LLC. Harness Tax LLC is affiliated with Harness Wealth Advisers LLC, collectively referred to as “Harness Wealth”. Harness Wealth Advisers LLC is an internet investment adviser registered with the Securities and Exchange Commission (“SEC”). Harness Wealth Advisers’ registration as an investment adviser with the SEC should not imply a certain level of skill or training.

This document does not constitute advice or a recommendation or offer to sell or a solicitation to deal in any security or financial product. It is provided for information purposes only. To the extent that the reader has any questions regarding the applicability of any specific issue discussed above to their specific portfolio or situation, the reader is  encouraged to consult with the professional advisor of their choosing.