Stripe avoids the mayhem of a bear market in tech by staying private

Yes, I am sure they were delighted when the online payments giant was valued at $95bn – and their shareholding at around $23bn. But because it isn’t real money in the bank, it might not matter whether it was $23bn or $15bn.

What’s a few billion when it’s all on paper anyway? If they aren’t about to cash it in any time soon, it’s just a number. The main thing is that they are very rich and financially secure.

But when tech valuations began to plummet on the stock market, including those of blue chips such as the parent groups of Facebook and Google, it was inevitable that valuations of private firms would fall too.

Last week it emerged that Stripe investor Fidelity Investments has cut the value of its holding in the California-based company by 13pc. This would wipe $12.3bn off the overall Stripe valuation.

The Collison brothers might not be too worried about the paper value of their shareholding falling by nearly $3bn. But investors who stumped up in the last funding round might have a different point of view.

At this point it seems almost odd that the company has not floated on the stock market.

In the current climate it even looks like Stripe may have missed the boat – at least for a while. Investors who have been sitting on huge paper gains might have liked the opportunity to turn those gains into cash money.

Those who got in later, and may be technically in the red on their investment, will know they have to sit it out at least until the market turns – which could be a long time coming.

There is nothing wrong with running a multibillion dollar business like Stripe as a private company. Not everything has to be listed on a stock market somewhere. However, much as the founders might be happy with that, a wide investor base could take a different view about when they can realise their gains.

The Collisons are in a strong position. If they were a listed company, they would have a huge spotlight on the share price in what is generally a bear market for tech stocks.

The very public fascination with the short-term stock performance or quarterly operating performance could become a distraction for a management team that has a clear plan about where they want to take the company.

Stripe is expanding into new product ranges, including banking-type products, while also eyeing the wider growing online retail payments market. By remaining private, the Collisions have avoided some of the media and investor circus that goes with a public listing. As recently as last November, John Collison said: “We are very happy as a private company.”

The group had revenues of $11.1bn last year and has plans to hire another 1,000 staff in Ireland. It clearly doesn’t need IPO cash to expand, and it is suitably capitalised without the razzamatazz and distraction of running a fully fledged public company.

Either way, investors will have to wait until the dust settles on this unpredictable tech market. Meanwhile, the Collisons can get on with the job.

Time for closer look at our electricity prices

It took an EU energy commissioner from Estonia to point to how we could cut our electricity bills in Ireland.

Kadri Simson said Ireland should consider capping the high costs suppliers pay to connect to the electricity network. Any cut or capping of these charges would result in a financial hit to Eirgrid and ESB Networks, which charge suppliers for the connection and transmission of power around the country.

Simson suggested that reducing these connection fees to suppliers would be a better way of cutting household bills than introducing price caps on the bills themselves.

The latter, he said, is too costly and too unpredictable.

Eirgrid reported a surge in pre-tax profits for 2021 just a few weeks ago. Profits rose from €14m in 2020 to €40m last year. Revenues increased by 7pc to €737m. But despite the €40m pre-tax profit, it is paying the State a dividend of just €4m.

At the end of last year, Eirgrid had cash in hand on the balance sheet of over half-a-billion euro.

Obviously some of this was for trading purposes: there’s €80m held in trust for suppliers, and another €12m held in security deposits.

But that is still a hefty amount of cash on Eirgrid’s books. It has €211m in unutilised borrowing facilities and net equity of €370m.

Eirgrid’s strong performance last year was partially due to an over-recovery in fees because of less wind blowing. The company said this over-recovery “will be returned to customers through a reduction in tariffs in future years”.

Given that Irish connection fees and transmission fees are very high, and if you strip out taxes, Ireland has the most expensive electricity prices in the European Union – with prices running at 60pc above average. Spain has temporarily reduced transmission tariffs by 80pc.

Accounts for ESB Networks show that it made a profit of €10m last year. But its wage and pension bill for just 18 staff came in at €4.2m. This works out at an average of €233,000 each.

It might perhaps be time for a closer look at the mechanics of the electricity sector itself, as all our bills go through the roof.