Sequoia Capital is providing a significant liquidity option to Stripe investors by offering to purchase up to $861 million worth of shares in the fintech leader. This move addresses the growing demand for liquidity among limited partners (LPs) in venture capital funds, especially as companies like Stripe delay their initial public offerings (IPOs).
The offer targets LPs in Sequoia funds from 2009 to 2012, with a proposed share price of $27.51, aligning with Stripe's most recent 409A valuation of $70 billion. This valuation sits between Stripe's peak valuation of $95 billion in 2021 and its reduction to $50 billion last year. Sequoia's proposal gives early investors in Stripe a vital opportunity for a return on their investment amidst prolonged market uncertainty.
Sequoia's liquidity option is made possible by the firm’s restructuring in 2021, utilizing more recent funds to facilitate the offer. Selling LPs will benefit by avoiding carried interest on these sales, while Sequoia partners will not profit unless they have personal investments in the relevant funds and choose to sell those stakes. The offer, representing about 10% of Sequoia's total fair market value of Stripe shares, allows LPs to decide by August 14.
This move comes at a challenging time for venture capital LPs, who are experiencing a scarcity of liquidity due to delayed IPOs from high-valued private tech firms. Stripe, co-founded by John and Patrick Collison, has experienced substantial growth, processing over $1 trillion in payments in 2023, a 25% increase from the previous year. Despite this growth and a recent valuation of $65 billion, Stripe remains cautious about going public.
Operating in a competitive landscape with rivals like PayPal Holdings Inc. and Adyen NV, Stripe continues to expand its market presence through innovative payment processing solutions and a strong growth trajectory. Sequoia's strategic offer provides a timely liquidity solution for Stripe's early investors, balancing market demands with future growth opportunities.
