Stripe just became the latest high-profile fintech startup to see its valuation chopped by fickle venture capital investors.
The company told employees Friday that it had reduced the internal share price by 27% to $29 from $40, The Wall Street Journal reported, citing unnamed sources.
Stripe, with dual headquarters in Dublin, Ireland and San Francisco, made a splash last year when it raised $600 million from investors giving it a valuation of $95 billion and making it one of the most valuable U.S. startups.
As the market rout got underway in recent months, another venture-backed fintech was eviscerated earlier. The checkout fintech Fast, which had raised $124 million, abruptly shut down in April after attempts to raise more money were unsuccessful.
Shares of publicly-traded fintechs have been pummeled too, as investors raised questions about the sector’s viability in the current economic climate.
PayPal, for example, has seen its stock plummet about 70% since the start of the year. That suggests Stripe is still overvalued, according to the Journal.
A spokesperson for Stripe didn’t return a phone call or email seeking comment for this story.
John Collison, one of the two Irish brothers who founded Stripe, recently told a conference that he wasn’t sure if the company’s $95 billion valuation could be justified in the current economic climate. Inflation in the U.S. has surged to a four-decade high. He also advised startups to change their investor pitch to reflect the current economic reality.
Swedish buy now-pay later company Klarna is in a predicament similar to that of Stripe.
The company’s valuation plunged in its latest funding round to $6.7 billion compared with the $45.6 billion it achieved in June 2021. Earlier this week, Klarna, which at one time was Europe’s most valuable fintech, announced it had raised $800 million from new and existing investors at the lower valuation.
In May, Klarna dismissed 700 workers, about 10% of its staff. Like other companies in the BNPL sector, Klarna is unprofitable.
Prajit Nanu, co-founder and CEO of San Francisco-based payments company Nium, recently told CNBC that he’s expecting a “massive consolidation” in fintech.
“Companies which are not going to raise (money) are going to either get consolidated or shut down,” he said.