Financial service giant Stripe is the latest fintech firm to suffer a significant valuation drop this year as the company reveals it has cut the internal value of its shares by 28%.
The Wall Street Journal revealed Stripe’s fall in valuation comes from a 409A price change, which is a requirement for companies every 12 months.
A 409A is determined by an independent party who can impact the common shares value of Stripe. This entails that the value of shares owned by Stripe’s investors will also be devalued as preferred shares, which they hold, will be converted into common shares if the company goes public.
With a previous valuation of $95bn, Stripe’s current valuation is implied to be worth $74bn, with the internal share price dropping from $40 to $29. The payments processor confirmed its shares drop in an email on 30 June.
Stripe follows a number of major fintech firms that have suffered major devaluations since the turn of 2022. Klarna, the popular BNPL provider, closed a fresh $800m funding round at a new valuation of $6.7bn, a startling fall from the $46bn valuation it was listed at the previous year.
This downward trend in the fintech market has heavily impacted the sector, with falls in market valuations resulting in many firms laying off portions of their staff.
According to research conducted by TrueUp, it found that at the beginning of the year 631 employees were let go from big tech/fintech companies, in comparison to June, where it found a total of 28,657 staff cuts. Klarna and Amount are two examples of major companies making cuts to their workforce.
Many internal and external factors have been cited in the downturn of fintech investment in 2022. Rising inflation and impending recessions in multiple countries, such as the UK, have only compounded the lack of investment.
BNPL services are also facing more stringent regulations too, with the UK imposing tougher affordability credit checks for BNPL customers, with the country’s regulators stating that BNPL advertisements should be ‘fair, clear, and not misleading’.