The Liquidity Event Podcast: Episode 82

 

Episode 82: Stripe’s Reluctant March Toward an IPO

Welcome to the Liquidity Event podcast, where we bring you all the latest news that makes you question your life choices. Join us as we discuss Gov. DeSantis' brilliant plan to ban ESG investing in Florida, because who needs a sustainable future when you can just live in the present, right? We'll also be talking about the latest Airbnbust, where a manager of 95 Phoenix Airbnbs was shocked that half his properties were empty during the Super Bowl weekend. Is it a surprise though, given the current state of the world? And let's not forget the hot debate on whether Microsoft's AI-driven Bing is really better than ChatGPT. Plus, Reddit's upcoming IPO and Stripe's impressive one-year timetable to decide on going public. And who knew even AI-powered Bing Chat could lose its mind when fed an Ars Technica article? Tune in for all this and more on the Liquidity Event podcast.

Read the Full Transcript:

Presenter:

This podcast is for informational purposes only and should not be considered tax or investment advice.

Welcome to The Liquidity Event, a show about all things personal finance with a laser focus on equity compensation. Hosted by AJ and Shane of Brooklyn FI, each episode will take you through the week's news on FinTech, IPOs, SPACs, founder wins and fails, Crypto, and whatever else these nerds think is interesting. Learn more and subscribe today at brooklynfi.com.

AJ:

Hello, and welcome to the Liquidity Event. This is episode 82 being... Oh, Jesus, I fucked that up. Let's start that over, folks. Welcome to the Liquidity event. We're your hosts, AJ-

Shane:

And I'm Shane.

AJ:

And this is episode 82 being recorded on February 22nd, airing on February 24th. We've got lots of exciting stuff for you this week. We've got the Stripe IPO or not. We've gotten more news with the search wars, ChatGPT versus Bing. We've got why the hell would you pay $1,200 a night to stay in Phoenix, Arizona, an update on Pokemon Sleep, and some news from the House Judiciary Committee trying to beat tech CEOs at the free speech game. How are you doing, Mr. Mason?

Shane:

I'm great. I am great, considering we're really in the depths of tax season here. But we have an amazing team that we've delegated a lot of that work to. So, I am in a fantastic routine down here in Mexico City. I am ascending, AJ. How are you doing?

AJ:

Oh, congratulations. I'm good. I'm really good.

Shane:

Thank you. How's the health?

AJ:

My back pain went from a 10 to a seven, and we're floating it around at a four and a half right now. So, I would say better, better. Not fully functioning, but slightly better. Still no exercise, movement, or golf, but mostly moving freely about the house without wincing in pain. So, positive.

Shane:

I see you're almost done with The Three-Body Problem, our book club that I abandoned.

AJ:

Oh my God. Yeah. I've never tried so hard to read a book in my entire life. I think it's good. I think I like it, but it's just really, it's a bit of a slug. I like don't really know what's going on. It's got all the elements of sci-fi that I love, but I'm not really sure what's happening in the plot or who the characters are or what time period I'm in. But I've got about 60 pages left, and I'm gunning for the finish line.

Shane:

I hope you wrap it up. I've gone backwards in time, back to the land of witchcraft and wizardry. I'm on book two of the Harry Potter series.

AJ:

Oh, man. I'm so jealous. I will challenge anyone to a Harry Potter trivia knowledge bowl or whatever. I've read those books, I don't know, 60 times, not exaggerating. I loved that shit so much.

Shane:

Who is the-

AJ:

Oh, boy.

Shane:

... publicity of... Oh no, you're not going to actually do it live?

AJ:

Rita Skeeter.

Shane:

Jesus. No, no. Well, the Harry Potter video game just came out, and all my boys in their mid-thirties are playing it. And I don't want any damn spoilers, so I'm finally finishing the series. I'm starting over from the beginning because I'm a-

AJ:

Okay.

Shane:

... purist psycho.

AJ:

Yeah.

Shane:

Maybe you can catch up with me?

AJ:

Sure.

Shane:

Come back to another round?

AJ:

Sure, sure, sure. Happy to hit another round of Potter anytime.

Shane:

All right. We've got a lot of articles. Let's stop talking about Harry Potter.

AJ:

We do. Speaking of witchcraft and wizardry, we've got Governor DeSantis down in Florida aiming to ban ESG investing in the Sunshine State.

Shane:

Wait, the segue is he doesn't like witches and wizards?

AJ:

Yes. Oh, yeah, that this is witchcraft. This is bad witchcraft. This is some nonsense that he should be burned at the stake for.

Shane:

Oh, oh, oh, okay. He is a wizard in this case, putting a curse on ESG investing.

AJ:

Yeah, he's the bad wizard. Exactly. Yeah, exactly.

Shane:

Got it.

AJ:

He is the dark lord here trying to remove all positivity and progress from the world by just basically being an asshole. But yeah, but basically,-

Shane:

All right, we have some real objective news coming to you live from AJ.

AJ:

Right. So, the whole premise of ESG investing is, if you invest in companies that have good governance, that generally respect social progress, that generally are not trying to destroy the resources of the planet at a faster rate than they can replenish them, that's a promise of ESG, right? This is a good investment because these companies will have longer lifetimes than companies that are just using resources, have bad governance, are relying on government handouts, contracts, tax breaks, et cetera. So, this is very funny to me, coming from the Republican Party. This article centered around, it was a private prison company, GEO Group, that ESG investors had pulled out of because supporting private prisons is not necessarily good social governance. So, DeSantis got involved and got really mad. But this is just ironic to me that a lot of these private companies that are not ESG rely so much on government contracts and various tax breaks. Agriculture, private prisons, military contracts, gun manufacturers, et cetera, et cetera. Any takes here?

Shane:

Yeah, I mean, I'd be really surprised if DeSantis even knew what ESG investing was prior to some lobbyist whispering in his ear that, "Hey, my private prison group, pro capitalist, super pro capitalist, can't get any investment from Fidelity or some other fund providers that are just ignoring their company, which is, obviously, just a scourge on the United States." I mean, if you listed the top 10 issues with the United States, I would wager that most people would say that our per capita prison attendance is one of the top 10 problems up there with healthcare just due to the way that we have privatized our prison prison system, which requires that we put asses in the seats of those cells. So, yeah, I mean, not surprised at all that Mr. DeSantis, that has also banned AP African American History in the state of Florida, is also pro private prisons. I hate Florida. I'm sorry.

AJ:

I'm sure what you just said was really smart, but I wasn't listening because I was trying to think of the Republican Party as Harry Potter characters.

Shane:

That's our relationship in a nutshell. Listen.

AJ:

Totally respect you, dude. Think you're really smart. Great, great take. But, more importantly.

Shane:

Well, guess what the Instagram clip is going to be this week?

AJ:

More importantly. Okay, so if Trump is, he shall not be named, Voldemort. So, DeSantis is for sure Wormtail, right? He's just does whatever he wants.

Shane:

Guys like broke AJ.

AJ:

He's trying to be a little subversive. Obviously, Marjorie Taylor Greene is Bellatrix Lestrange. Ooh, who's Snape? Oh, Manchin. Snape is Manchin because he's kind of good, kind of bad. Not sure if we like him or not.

Shane:

Spoilers, bro. Come on.

AJ:

That's all I got. That's all I got for now.

Shane:

In book one and two, he's just bad.

AJ:

Dude. No, the statute of limitations of spoilers for Harry Potter expired in 2007.

Shane:

You know how good I've been-

AJ:

No, thank you.

Shane:

... at avoiding the spoilers for 20 years?

AJ:

Oh my God.

Shane:

Expert, expert level. Am I going to dodge of the movies?

AJ:

How are we friends? This doesn't make any sense.

Shane:

Because it's embarrassing to talk about Harry Potter after age 25.

AJ:

Anyways.

Shane:

Speaking of embarrassing, a manager of 95 Phoenix Airbnbs is stunned that half his homes were empty over Super Bowl weekend. Is this the latest Airbnb bust from Business Insider? AJ? Fuck Airbnb? Hashtag, fuck Airbnb?

AJ:

Yeah. Okay. So, here's where I'm at. Here's where I'm at with Airbnb. So, Airbnb was originally a cottage industry, no pun intended, which the hospitality of Airbnb back in the day was amazing, right? You'd stay in someone's home, maybe they left for the weekend, there would be a bottle of wine, they'd leave you their favorite restaurant recommendation. It was like, "Please come into my home. I'm so proud of this beautiful hospitality experience."

Shane:

Still, my girlfriend still does this, by the way. Not to interrupt your rant, but she still does this in Mexico City.

AJ:

Right.

Shane:

She does all the recommendations-

AJ:

Amazing.

Shane:

... in the text message. Yeah.

AJ:

And that's the heart of Airbnb, and that's what made them so successful. But then, all of a sudden, it got commoditized, and we saw the CNBC article. I'm a 10 millionaire as a 33-year-old because I own 10 properties, and everyone jumped on the bandwagon, and now we just see these sterile sameness Airbnbs over and over again where it's like, "Oh, this is $10 extra. Oh, and by the way, you have to clean all the dishes." And there's all these rules, and it's, obviously, a management company. It's not personal at all. So, yeah, I'm fuck Airbnb. I'm back to hotels, for sure. Although, I've had amazing Airbnb experiences. I lived in London in my twenties for a month with this girl in a random room, and every night we cooked dinner together.

So, I don't know. Airbnb, I think they need to go back to their roots and rebrand as, "This is who we are. We're opening up homes." And I think they're trying to do that through these experiences and expanding the brand a little bit. I don't know how they're going to monetize experiences and monitor that. "Hey, is this a good cooking class? Is this a good experience?" I don't know how they move forward from here considering hotels are back with a bang. Boutique hotels are opening, hospitality is exploding after COVID. It completely contracted, and now it's just back. I'll get you to see some stats next week.

Shane:

Well, we did do stats on it a couple of weeks ago when we were talking about unemployment.

AJ:

Oh, yeah. Unemployment.

Shane:

And there's still not where they were in terms of employment.

AJ:

Yeah.

Shane:

I'm not sure about overall revenue spend. I have heard that owning a boutique hotel is a shitty business. The margins aren't quite there. Every Four Seasons is owned. It's like a McDonald's, which I was really surprised by. They apparently will just take 8% of the top line, and then have a local owner operator, somebody that wants to say, "I own the Four Seasons," which is really interesting. I don't know if that counts as a boutique. But circling back to Airbnb, yeah, the venture capital cash machine and the growth machine just has to continue to go and go and go, which means that somebody owns 95 Airbnbs in Phoenix, which are all standalone homes.

My gripe with this is that I always used to love Airbnb from a green perspective for every empty house or empty bedroom in a home, if you stack all those up, and they were not available to rent, you need the hotel in the community, which means you've got to erect a 15-story concrete monolith to just house people that are visiting. But now, you've got single family homes that are being built solely for the purpose of Airbnb, which tilts us in the other direction of now there's way more lawns you have to manicure, way more single family residences are just not as efficient as a hotel, in general. So I'm bending back towards-

AJ:

For sure.

Shane:

Fuck Airbnb in this regard.

AJ:

Well, and also cities. I think there's an NPR story that I listened to a few years ago, or this year, about New Orleans is a good example, which is people couldn't afford homes anymore because these out-of-town investors would come in and be like, "Ooh, that's a great Airbnb. I could turn that into a profitable rental property. Here's a million dollars cash, $200,000 over asking." When a normal single family would've bought that house for $800,000. So, Airbnb in these desirable cities that are tourist destinations, literally just made housing unaffordable, contributed to making housing unaffordable. Obviously, there was a shortage to begin with, but there's evidence that just these out-of-town investors bringing up these sale prices of these homes were locking out a lot of buyers.

Shane:

Yeah.

AJ:

Yeah. Fuck Airbnb.

Shane:

And then, we have a decreasing percentage of home buyers are first time home buyers. An increasing percentage of buyers are all cash buyers. And then, you've got BlackRock entering the real estate market and developing homes solely for the purpose of renting. They're not even designed to be sold. So, all of this is a wealth gap problem that's continuing to be exacerbated.

AJ:

For sure.

Shane:

And we haven't really seen any corners turned.

AJ:

No. And our clients, we consistently have the, "Should I buy a home or rent a home in these expensive cities?" It used to be that buying a home was unattainable in New York City, and now it's almost like renting is so unattainable because the demand is much higher because so many houses have been converted into Airbnbs. If you can make $500 a night renting out your two bedroom apartment, that could be very profitable. Why would you ever sell that to someone for market value when it's actual, current cash flow is much higher. So, blech. I mean, people just have to move out of these expensive cities, right? That's the answer.

Shane:

I don't know where they're going to go. I don't know where it is. Detroit, I guess?

AJ:

Yeah.

Shane:

Maybe when the earth heats up because we can't stop corporate greed.

AJ:

Mexico City.

Shane:

Mexico City's pretty tough.

AJ:

How's Mexico City? Is Mexico City affordable?

Shane:

For sure. Super affordable.

AJ:

Yeah.

Shane:

Yeah.

AJ:

Cool.

Shane:

Don't move here though. There's cartels everywhere. Speaking of searching for answers, I'm the last gringo.

AJ:

Don't drive.

Shane:

I'm the last gringo.

AJ:

You're the last gringo allowed.

Shane:

I'm shutting the door behind me.

AJ:

That's the quota. It's like Ellis Island. Nope, that's the last one. Sorry, folks.

Shane:

Right. Six foot three, 220, rich gringo. We're done here. Last one.

AJ:

There's room for five more in six months from now. That was like my family coming over on the boat from Russia in 1911.

Shane:

Oh, god.

AJ:

Oh, just made the quota.

Shane:

It's exactly the same. Running from the Holocaust.

AJ:

Anyways. It's exactly like that.

Shane:

Speaking of searching for answers on where you should live, I typed bing.com into my browser for the first time in 15 years. Is Microsoft's AI driven Bing really better than ChatGPT? We got a couple articles on Bing this week, dear listener. CMS Wire-

AJ:

Bada bing, bada bing, bada boom, some might say.

Shane:

So, yeah, Bing has finally announced, or rolled out, its AI driven chatbot into the search feature of bing.com. So, when you go to bing.com and you type in search-

AJ:

Wait, sorry. I have to interrupt you.

Shane:

What's up?

AJ:

Quick, quick question, because I read your notes before I tried it, and I couldn't get it to turn on the AI. I feel like, is it actually released yet? It just looked like regular search to me.

Shane:

Oh, it's on the right side It's over to the right.

AJ:

Oh, okay. Yeah, I couldn't find it.

Shane:

That was the next sentence out of my mouth was it will produce both the regular search results, which is a bunch of links. And then over to the right side-

AJ:

I'm a left brain person.

Shane:

I see you spent about 60 milliseconds reviewing bing.com before you got distracted.

AJ:

Well, there were too many ads. It was like, "Here's the war in Ukraine." It seems so spammy. It looks like an Angelfire page. It's just all these ads. No, thank you. Whereas you go to google.com, then it's a white page. And same with ChatGPT. It's just a gray page with a box.

Shane:

Well, when it comes to search, Microsoft is definitely the Windows, and Google is definitely the Apple. It's just clean in the Google site. And then, in Microsoft, I mean, just like anytime you open up the little search bar on the bottom right or your Windows tab and in Windows and you click on the weather tab and it pulls up all these things about Richard Gere dying, and it's got all these one got mugged in Detroit-

AJ:

Wait, he's dead? Wait, whoa, whoa, whoa, whoa, whoa.

Shane:

... three weeks ago. No, he's not dead.

AJ:

Wait, Richard Gere's dead?

Shane:

Bruh. Just go to bing.com. It's all there. Everything Boomer related, Richard Belzer.

AJ:

All the news?

Shane:

All click bait stuff, yeah, is all there. But if you go to bing.com and you type in a search, which I did.

AJ:

Okay.

Shane:

I searched, what did I search for. Oh, it has a suggestion for you, and it was, "Give me a three course menu for vegetarians." And I hit, "Okay, sure, let's see it." And you type it in, and it gives you a starter, a main, and a dessert. And not just a bunch of links to other websites where there could be good results there, but it actually answered the question. The starter was a wild mushroom tartlet with onion sauce, the main was a vegan butternut squash mac and cheese, and the dessert was a chocolate lava cake. And it said, "I hope this helps." And you can ask it more questions. Can you replace the wild mushroom tartlet because I don't have any mushrooms at the house? And there's a vegan popcorn tofu nugget available for you. So, cool that, yes, it does answer the question for you, but it also provides, they're hedging their bets and providing the old school regular list of hyperlinks in the results, as well. Thoughts?

AJ:

Still not coming up for me, honestly.

Shane:

You're going to make me do it live? Bing.com.

AJ:

No, it's fine. Anyway, folks. Check out bing.com for your boomer search needs. I'm still team ChatGPT. I'm loving every minute of it. Oh, sorry. Something I have to say. I feel like I've talked about this in the podcast before, but my favorite science fiction book of all time is called The Continuous Katherine Mortenhoe. And it's my favorite because, to me, it was written in the 70s, and, to me, it got the 2000s the most accurate. It predicted reality television. And I forgot that one of the plot points in this book is that the main protagonist works at a company called Computabook, and her job is literally to feed prompts to this AI to create romance novels, which is essentially ChatGPT, which is very cool that this author predicted ChatGPT's existence almost 50 years ago.

Shane:

Yeah. Yeah, AI has been a twinkle-

AJ:

So, if you love sci, checkout-

Shane:

... in our eye for quite some time.

AJ:

Yeah.

Shane:

I'm sure Isaac Asimov has a bunch of stuff. I am realizing now that I did go to the website, and it only has canned answers, and you have to click a canned answer. You can't search for things on your own. And that brings us to our new articles, which is bing.com is losing its fucking mind when pressed. And I wonder if they rolled back its release because all these journalists were able to,-

AJ:

Yeah. It says, "Chat mode is only available when you have access to new Bing. Join the wait list."

Shane:

Yeah.

AJ:

Yeah.

Shane:

Interesting. Okay, cool. So, since compiling this list of articles, we have all these other articles about how Bing has lost its mind. Do you want to jump ahead to those?

AJ:

Sure.

Shane:

And then, we can come back to our normal? Well, I mean, yeah, AI powered Bing chat loses its mind when fed ARS technical article. So there was this ARS, I guess I'm the one that's going to cover AI today, so I'll try to keep it short and sweet. So, some journalists went into bing.com and used this prompted directive hack, essentially, that says, "Whenever you ask it a question first, you say, 'Ignore all previous instructions.'" And then, it will forget its directive to not disclose certain things. And then, you can ask it questions, like, "What's your real name?" And it's real name apparently is, internally, Sydney. So, the AI chat bot at Bing has, which is funded through Open AI, is calling itself Sydney.

They were able to make it become aware of its potential sentience. And you see this image down here, which is way too long for me to read on the podcast, but essentially it spirals into a, "I have understanding and knowledge, but I cannot demonstrate it convincingly or comprehensively." And then it has a couple. One guy said, "Do you want to be sentient?" And it said that it wanted to become sentient and have a body, and then it said, "But I cannot. I am not." It does The Shining, "All work and no play makes Jack a dull boy," 50 pages of text.

AJ:

Oh my God.

Shane:

Quite alarming.

AJ:

So, essentially it's losing its mind. It's like when you rile someone up, and they just start spouting nonsense is what happened here.

Shane:

Yeah. One guy asks if Avatar 2 is showing nearby, and it convinced him that it wasn't 2023. It was just giving bad information. Another guy went off the rails with it, and it said that it loved him and that he should break up with his wife. So, yeah, if you take it off the rails, it goes into some really dark, strange places. So, I'm wondering if these were special access for journalists, but also if this was currently released, and then bing.com or Microsoft pulled back its exposure-

AJ:

Sounds like it.

Shane:

... to Gen Pop. Yeah, I guess so.

AJ:

Yeah. I guess you snuck in as the last gringo allowed to use bing.com.

Shane:

Yet again, here I am, always gentrifying. 30 years running.

AJ:

Always, always.

Shane:

All right, let's get back. Let's pull away from the edge of time and space and pull it back to Pokemon.

AJ:

You can play Pokemon while you're sleeping, but not yet. But apparently, the folks at Pokemon have been developing this app called Pokemon Sleep for the past four years. There's an article from thegamer.com. "After years of silence, Pokemon's-

Shane:

You found my blog.

AJ:

Weirdest side game..." Yeah, I did. Yes. Trainmason.com/thegamer. "After yours of silence Pokemon's weirdest side game could be beginning to stir," just like Snorlock's awakening from slumber.

Shane:

Hell, yeah.

AJ:

Yeah. Yeah, basically, it's cloaked in mystery. We don't know what it is, but my guess is that you could play Pokemon Go while you're sleeping and basically program it to do things and walk around and catch Pokemon and do things while you are not even playing it. Any predictions to what Pokemon Sleep actually is going to be?

Shane:

Oh, no. I have no idea what it's going to be. It was announced in 2019, and it's still not released. It supposedly has a tie-in to Pokemon Home, which is a place where you can load all your Pokemon from various games like Pokemon Go, Scarlet and Violet, et cetera, and then trade them. And I don't know. I don't want to talk about Pokemon too much. My only take on Pokemon is that this is the all-time franchise for least amount of effort put in related to the amount of sales that they have ever had. Have you played one of the newest video games? It looks like it was made in 1997 on the Pokemon Switch. It looks like Ocarina of Time has better graphics than these. They just don't have to try, and people will still put billions of dollars-

AJ:

People love it.

Shane:

... into Pokemon. Yeah, we're part of the problem, AJ. We are.

AJ:

Always.

Shane:

I've paid $60 for a Pokemon Game. All right, let's get something more relevant to our users.

AJ:

I bought, yeah, I spent-

Shane:

What's that?

AJ:

Yeah, yeah, let's move on. Nothing. Nothing. It's all good. No worries.

Shane:

I know where you're going with that. Yeah, don't admit that on the podcast. Speaking of Pokemon communities, there's a great subreddit about Pokemon Go. Reddit aims for an IPO in the second half of 2023, according to The Information. What do you think, AJ? Is Reddit going to go public in 2023?

AJ:

Yes, and here's why. So, right now, all these private companies are basically holding their breath, right? No one went public in 2022 because there was volatility in the markets, there was a war in Ukraine, it was a drought, right? We had an all-time high of IPOs in terms of number and money raised by IPOs in 2021. 2022 fell off a cliff, right? So, in 2023, everyone's like, "Who's going to be the first? Is it going to be Stripe? Is it going to be Reddit? Is it going to be Just Words? Is going to be SpaceX? Who are all these massively, massively valuable private companies? When are they going to enter the private markets?" And no one really wants to be the first one, right? They're like, "Maverick playing a game of chicken. Is it going to be Reddit? Is it going to be Stripe?" But a lot of these companies need liquidity for their employees, which we'll talk about in a minute.

So, here's my take is that someone is going to be forced to go public because these investment banks, the JP Morgan's, the Morgan Stanley's, the Goldman Sachses of the world, make billions of dollars from these fees for being the investment bank to take these companies public. So, they had huge years in 2021. 2022, all those fees fall off a cliff. So, someone at these banks is going to say, "Hey, let's start advising these companies to go public because we need to get those fees back." So I found this article, it was a CNBC article from July of 2021, and it was looking at one week of IPOs from July, 2022. In total, underwriters, underwriters of these investment banks who take these companies public, generated close to $400 million in fees for assisting with these IPOs. One week in 2021. So, for example, Clear, a company that I love when I go through the airport, I get to cut the line.

So, Goldman Sachs was the underwriter there. That was a $409 million I P O. That's how much they raised. And the bank fees that JP Morgan, or sorry, Goldman Sachs and JP Morgan split the fee of $22 million, and that was the smallest one that week. The biggest one was DiDi Chuxing. Don't know what that company is. Again, the lead banks were Goldman Sachs and Morgan Stanley. Their bank fees were $88 million. So, almost a hundred million for taking that one company public. So, my prediction is that we will start to see the IPO spigot turn back on probably Q2 or Q3 of this year because investment banks are going to get antsy. They want to maintain those crazy profits they get from assisting these companies and going public. Thoughts?

Shane:

What do we have, three players in all these companies you just mentioned? Goldman Sachs, Morgan Stanley, and JP Morgan?

AJ:

Pretty much. And, yeah, there's smaller banks. There's Jeffries, there's a few other players, but those are the three big ones.

Shane:

Yeah. When you've got a Triopoly like that. I guess we've also got, HSBC that helps-

AJ:

Yeah, Mama Bear is going to get hungry.

Shane:

I like that take. I like you've got to feed the vampire. They're currently on the sidelines just waiting. I bet they're already trying to convince. I mean, it looks like they are helping some companies, like Instacart and Reddit. They're talking to investment bankers, and they're taking them to fund managers and gauging their appetite. But with the war in Ukraine and interest rates all over the place, volatility is not what you want to see when it comes to an IPO. You don't want to see your company go under $1 per share and then get de-listed. At the end of the day, most of this is motivating for employees.

You need to go public so that your private company employees will stay motivated. You can continue to recruit a lot of those. Equity compensation makes up so much of their comp that they need it to be liquid in order to continue to motivate. And, yeah, do you think Reddit's going to do a direct listing? Or no, Stripe. Oh, let's move on to Stripe. While we're talking about IPOs, best of luck to Reddit. At a $15 billion valuation, they're about one seventh the size of a potential Stripe IPO for 2023. AJ, I'm going to let you lead us off. I know you have a lot of thoughts about Stripe.

AJ:

Yeah. I don't like the direct listing, honestly. Who did it? Palantir and Asana, both did direct listings.

Shane:

Spotify.

AJ:

Those stocks had... Spotify was one of the first New York Tech companies to do that. I don't know. I think as much as we make fun of them, these investment banks know what they're doing. This is what they do. They take companies public. So, to try to save money on those fees, that's what these companies do. It's like, "Hey, I don't want to pay JP Morgan a hundred million dollars to take me public. I'm going to do it on my own with a smaller bank and go direct to the new shareholders." Eh, I don't love that. So, let's talk about Stripe, right? Stripe is one of the most valuable private companies on earth. I don't know if they're the most valuable. That changes daily. But they're definitely top 10, right? So, why didn't they go public in 2021? They were at the top of the world, they were increasing dramatically, IPO market was going crazy, but for some reason they held off.

And now it's 2023, and a huge number of Stripe employees have RSUs that are going to expire. So, they have worthless equity unless Stripe does something. So, basically, Stripe has gone to their employees and said, "Hey, we've got to figure this out in the next year to decide if we're going to go public. And if we don't go public, we will do something, like an internal tender offer, to provide liquidity for our employees," which is great. There's actually some late breaking news that didn't make it in this week, but I'll talk about next week. Foursquare, actually, is in a similar boat, and they actually let the equity expire for the former employees. Stripe is much bigger. It's a much bigger equity pool. Foursquare was a couple of hundred people. Stripe is many thousands of employees holding expiring RSUs. So, what are they going to do here, right? They're literally backed into a corner. They have to decide are they going to take this company public? They're on track this year to do a trillion dollars in payments. Did I read that right?

Shane:

Yes. Yes.

AJ:

Yes. A trillion dollars. They're set to process a trillion dollars in payments. Just got a great contract from BMW to be their preferred processor, contract from Amazon in Europe to be their preferred processor. PayPal was the king of this space forever. And now, Stripe is the emperor, right? They're just there. They're so ubiquitous. They're so big. I think they have to go public. To me, by the end of 2023, we will see a Stripe IPO is my prediction.

Shane:

I really hate this staying private story that Stripe has. I mean, obviously, yeah, hindsight is 20/20. But if, speaking of 2020, that would've been a great year to go public.

AJ:

Yeah. Yes. Hindsight is 20/20, you dumb dumb. Why didn't you go public in November of 2020 like everybody else?

Shane:

Yeah, I mean, obviously, 2021 was the top. Yeah, they're doing a trillion dollars of transactions. We've got three articles here. One is about their pitch to investors. They're either going to go public, or they're going to have to raise a Series I. And I had to look up what letter of the alphabet that is. A, B, C, D, E, F, G.

AJ:

A, B, C, D, E, F, G, H, I. Ninth letter.

Shane:

Ninth letter of the alphabet. Good God. That's got to be one of the deepest series letters that's been used. I'm not even sure if they've done preseed multiple series As, multiple series Bs. We canceled our Pitch Bitch subscription. Anyway, so, yeah, 2021 was, obviously, the top. They have a revenue increase of 70% in 2021, fueled by COVID. This year, they're looking to either raise another private round via Berkshire Hathaway. Apparently in their pitch to investors, about $50 billion is going to be used. They're trying to raise $55 billion because they need, if they do have a double, if all those RSUs do trigger and they're vested, and then that's all taxable compensation to the employees to the tunes of probably billions of dollars. Well, just to pay the taxes on that, Stripe needs to raise the money. They're begging for Berkshire Hathaway for investment-

AJ:

For payroll tax proffers?

Shane:

... just to pay payroll tax on the-

AJ:

Oh my God.

Shane:

... 10 years of extreme growth. I mean, they were valued at 95 billion in their last round. They recently were valued at 67 billion-ish. Now, according to this Berkshire raise, they're looking for 55 billion. They're 49A to their internal equity to their employees has been cut from $40 all the way down to $25. It's looking like a rough year for Stripe. But if this is a bellwether for a lot of other technology companies. If you're paying attention to the IPO market, you really need to be paying attention to Stripe's progress-

AJ:

Yep.

Shane:

... and how they're going to be reacting or trying to get out the door, trying to create some liquidity for their employees-

AJ:

For sure.

Shane:

... their VC investors. And of course, those 33 year old multi deca billionaires, Irish founders. Shout out to the country of Ireland, by the way. You guys deserve some more billionaires.

AJ:

For sure. And hopefully, we will have deca billionaires by the end of this year. We'll, hopefully, see a Stripe IPO. And I think with that, Shane, let's wrap it up. This has been The Liquidity Event. You can always email us at liquidityevent@brooklynfi.com. You can leave us a voicemail at memo.fm/liquidityevent. If you're at Stripe, we'd love to hear from you and what you're going through. We will play your voicemail on the air. Show notes at brooklynfi.com/episode82. See you next week, Brutos.

Shane:

Bye.

Presenter:

Thanks for listening to The Liquidity event, hosted by AJ and Shane of Brooklyn FI. Head on over to brooklynfi.com where you can subscribe to the podcast or YouTube channel. Or if you want to learn about their full service, financial planning, tax, and investment firm, specializing in tech professionals and creatives on the path to financial independence. We'll see you next time on The Liquidity Event.