Checkout.com Cuts Internal Valuation by $29bn

Checkout.com, a popular global payment processing firm, has slashed its valuation from $40 billion to $11 billion, reacting to the market's worsening sentiment and downfall in the big tech sector. The 70% drop aims to reflect "current macroeconomic conditions."

According to the FT report from Tuesday, employees were informed of the internal valuation cut last month. In addition, Checkout.com slashed the price at which its employees can exercise their stock options. The previous level was $252 per share and has now been reduced to $65, people familiar with the matter said.

Lowering the internal valuation, which is different from the valuation determined by investors, may have several purposes. It benefits employees by reducing the cost of equity and provides a chance for higher profits when the company wishes to launch an initial public offering (IPO).

Earlier this year, Checkout.com successfully closed a $1 billion Series D funding round, which raised the company's market valuation to $40 billion. Now, the company is back to valuations closer to 2021, when after the Series C round it raised $450 million and reached a $15 billion valuation mark.

Other payment companies, such as Instacart and Stripe, have recently made similar cuts. It shows how the changing macroeconomic environment and the continued decline in the valuations of publicly-listed tech companies are taking a toll on private markets.

Venture capitalists were very eager to pour money into promising start-ups in 2021. However, this year they are pulling back on their investments or forcing companies to generate profits instead of focusing on growth.

The Ecommerce and Cryptocurrency Slump Makes It Even Worse

Checkout.com is a decade-old company that processes payments for famous brands like Netflix and Pizza Hut. However, its rapid growth during the Covid-19 pandemic was possible due to its partnership with major crypto exchanges, Coinbase and Binance.

When cryptocurrencies stopped growing, market sentiment turned 180 degrees, and investors pulled their money out of the digital assets market, Checkout.com lost its pace. Investors' interest in payment companies also declined due to the slowing sales performance. The valuation of Klarna, a buy-now-pay-later start-up, fell by nearly $40 billion to $7 billion.

Furthermore, Stripe lowered its internal valuation by 28% and laid off 14% of its workforce. Job cuts have not spared Checkout.com either, and the company announced in September that it had to terminate 5% of its employees.

This article was written by Damian Chmiel at www.financemagnates.com.