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  • A $100 Billion Valuation Poses Risk For Fintech Star
    Bloomberg

    A $100 Billion Valuation Poses Risk For Fintech Star

    (Bloomberg Opinion) -- If you’re in the business of selling picks and shovels for the gold rush, then there’s a logic to raising money when the scramble is at its most frenzied.Stripe Inc. co-founders Patrick and John Collison certainly get the idea. The Irish brothers are raising funds for their online payments company at a valuation of between $70 billion and $100 billion, Bloomberg News reported on Tuesday. In April, the San Francisco-based firm was valued at just $36 billion. But soaring private valuations do come with a risk.Stripe is a beneficiary of the virus-induced lockdowns. E-commerce was booming before Covid-19 struck, but global stay-at-home orders have taken things to a whole new level. Online sales grew an average of 15% annually between 2010 and the start of this year, according to the U.S. Census Bureau. Then in the three months through June, they jumped 45% from a year earlier, as shops were shuttered and spending shifted online. The pace of growth decelerated to 37% in the third quarter as some lockdown measures eased.The increase must have been good news for the Collisons, whose firm takes a cut of payments made to merchants that use its products. As a private company, Stripe doesn’t publish any of its financials, but publicly traded Dutch competitor Adyen NV provides a useful yardstick.The Amsterdam-based rival said that the weekly volume of online retail payments it processed almost doubled between January and mid-September. Even though its overall pace of sales growth almost halved — it’s been held back by significant exposure to the travel industry, where payment volumes fell by about two-thirds in the same period — Adyen’s stock has more than doubled since the start of the year. As of Wednesday, it’s valued at 48 billion euros ($57 billion).Stripe is tracking that same trajectory: A new valuation of $70 billion would represent a doubling since April. The companies are broadly similar, offering a global product that no others have yet managed to match. But their customer base has differed, according to ABN Amro Bank NV analyst Cor Kluis. Adyen has historically focused on large multinational clients such as Uber Technologies Inc., eBay Inc., Gap Inc. and Booking Holdings Inc., while Stripe has concentrated on smaller businesses, he said. That has allowed Adyen to charge less than Stripe, since it’s more affordable to scale your services for large clients than for a panoply of smaller ones. Increasingly, though, the payments processors are encountering each other in the middle, as Stripe extends its offering upward into medium-sized companies and Adyen moves downward into the same space.There will be unanswered questions about Stripe’s valuation, though, particularly if it lands at the upper end of the reported range. The accelerated adoption of e-commerce this year might make it harder to replicate the pace of growth in the years to come.The new funding round might give the Collisons the choice of pushing any prospective initial public offering further down the line, but a punchy private valuation might also make such a delay necessary. If e-commerce growth slows once life returns to a semblance of normality, then justifying a $100 billion valuation to the public markets could be tougher. Silicon Valley stars from Lyft Inc. to Slack Technologies Inc. have shown that life under the withering gaze of public investors can be difficult — both stocks continue to trade below their IPO price.There’s a lot to be said for making hay while the sun shines. But beware of sunburn.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Why Ford Stock Is Roaring Higher Today
    Motley Fool

    Why Ford Stock Is Roaring Higher Today

    Shares of Ford Motor Company (NYSE: F) were trading higher on Tuesday morning, after Ford announced the hiring of a new chief marketing officer -- and after Reuters reported that Ford's new CEO is moving aggressively to reduce rising warranty costs. As of 10:45 a.m. EST, Ford's shares were up about 6.9% from Monday's closing price. Reuters reported that new Ford CEO Jim Farley has begun an initiative to reduce so-called warranty costs, the costs that Ford incurs when vehicles are repaired under warranty or in conjunction with a recall.

  • Shopify Sees ‘Paradigm Shift’ as Black Friday Approaches
    Bloomberg

    Shopify Sees ‘Paradigm Shift’ as Black Friday Approaches

    (Bloomberg) -- Shopify Inc. expects a banner holiday season as the worsening pandemic encourages more consumers to shop online and buy from the small businesses that sell through its platform.While the pace of growth will likely slow once the pandemic ends, this year’s gains will likely hold up, President Harley Finkelstein said in an interview. The company reported a 109% increase in gross merchandise volume, a key metric for online retailer companies, in the third quarter.“This is not going to go back to the way it was pre-Covid. This has been a paradigm shift,” he said. “I don’t think it’s fleeting.”With Black Friday still a week away, it’s already clear the next two months will be “really good,” Finkelstein said. The number of orders merchants received rose 17% in the second week of November compared with the first week. The average consumer cart of merchandise sold in the second week of November was $81, an 18% increase over last year, he said.Read more: Covid-19 Has Changed Shopping for Good, Retail Giants PredictLarge retailers have been among the biggest beneficiaries of the online shopping boom and will see the most growth in market share this season, according to a report by Adobe Analytics, though small retailers will experience the greater percentage revenue boost. While more large chains are turning to Shopify, the vast majority of Shopify’s customers are businesses with 500 or fewer employees.Shopify is counting on consumers to choose independent brands for items that aren’t staples. That “conscious consumerism” is getting a boost from the pandemic, Finkelstein said: “Direct to consumer is not a fad.”Almost 40% of shoppers will make a deliberate effort to shop at smaller retailers over the holiday season, according to the Adobe report.Shopify began in 2004 as a service provider to small companies, helping them build websites to sell to customers directly. As the e-commerce market has expanded, so has its line of tools and services. Today most of its merchants peddle their wares on multiple platforms. Since 2017, merchants have been able to connect to Amazon.com Inc.’s marketplace through Shopify.The Ottawa-based company has also struck partnerships with major platforms including Facebook Inc., Instagram, EBay Inc. and TikTok Inc. In June, it announced a deal to get some Shopify merchants on Walmart Inc.’s third-party marketplace.Shopify now views itself less as an e-commerce company than a “retail operating system” for merchants where they can manage multiple sales channels as well as marketing, data analytics, shipping, payments and capital needs, Finkelstein said.Merchant HurdlesU.S. e-commerce sales are expected to soar almost 36% this holiday season, according to eMarketer, almost perfectly offsetting losses in brick-and-mortar stores. But the smaller firms Shopify serves face unique hurdles because of the pandemic.“The biggest challenge is navigating the uncertainty,” said Marcus Wilson, co-founder of NOBULL, a footwear and training apparel company that uses Shopify. While NOBULL’s sales are up 78% so far this year, matching inventory to that growth is difficult because products for this holiday season had to be ordered six months ahead of time, during a period of huge economic uncertainty.Shipping delays have also been a problem, said Charis Jones, founder of Sassy Jones, a Shopify merchant that produces jewelry in India and China and imports it to the U.S. to sell. “We got bought out by other large companies on our cargo space hundreds of times, too many to count, and it was expensive -- like four times more expensive to import,” she said. “We just got bumped for our Black Friday stuff.” Still, the company expects sales will grow threefold this year to at least $15 million.Read more: Shun Amazon and Shop Local, Ontario Premier Begs ResidentsWar ChestShopify is in the process of creating a network of warehouses across the U.S. in order to match Amazon’s price on two-day shipping, though it has no intention of competing on same-day service. “We don’t have to do it in an hour or two. We think consumers can wait 48 hours to get a great product,” Finkelstein said.With a string of earnings beats behind it and an about 150% rally in shares this year, the company is awash in cash. It remains focused on growth and has no plans for dividends or share buybacks, Finkelstein said. Executives, including founder Tobi Lutke, don’t see value in making deals just to add revenue or customers but would consider other acquisitions, including to acquire talent.“Billions of dollars on the balance sheet gives us optionality. It means that we can invest in companies if we want, it means we can purchase other companies. It means we can finance our own capital program on our own for as long as we need to,” Finkelstein said.(Updates with link to story on Ontario premier’s comments about Amazon)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.