PayPal has entered talks to sell itself to a group including Stripe and Advent International.
According to the Wall Street Journal, the talks follow an initial proposal made in July, when Stripe and Advent offered USD 60.50 per share for PayPal, a price the company considered insufficient. The two sides have since continued negotiations over a higher valuation, though no agreement has been finalised and there is no guarantee a deal will be reached in the coming weeks.
The July proposal valued PayPal at approximately USD 53 billion. Before the offer became public, PayPal shares had been trading at lower points, giving the company a market value of around USD 40 billion. This marks a significant decline from PayPal's peak during the Covid-19 period in 2021, when shares traded above USD 300, and the company's market value exceeded USD 280 billion. Following media reports of the deal talks, PayPal shares rose by 1.8% on Friday, lifting its market value to close to USD 53 billion.
Turnaround strategy
According to the announcement, PayPal's chief executive is in the early stages of a turnaround plan that has already included cost reductions. During the company's most recent earnings report, released late last month, a company official said PayPal remained focused on its turnaround strategy while stating it would evaluate opportunities to maximise shareholder value.
The profit warning that preceded the leadership change was attributed to slowing growth in PayPal's branded-checkout product, which enables customers to pay with PayPal at online checkout, as well as internal execution issues. Since then, PayPal has restructured its operations into three business lines and said it would accelerate the adoption of artificial intelligence across the organisation. In its latest earnings report, the company highlighted growth in P2P payments platform Venmo, payments processor Braintree, its debit card offering, and its buy now, pay later business.
Industry reaction and ecosystem implications
Some analysts have expressed scepticism about the rationale for a Stripe-PayPal transaction. An analyst at William Blair described the USD 0.50 per share bid as a low offer and questioned its industrial logic.
Stripe, a privately held payments processor whose investors include venture capital firm Sequoia Capital, was founded by brothers Patrick and John Collison. Advent International, a US-based private equity firm, invests across five main sectors: business and financial services, healthcare, consumer, industrials, and technology.
A potential combination would bring together one of the sector's largest privately held payments infrastructure providers with one of the longest-established online payment brands, at a time when PayPal is attempting to reposition its checkout and wallet products against increasing competition in digital payments.
