PayPal faces pressure to sell

PayPal, one of the earliest names in fintech, is now a takeover target. Stripe, a fintech rival, and private equity firm Advent International have made a joint $53 billion bid to buy PayPal, according to press reports.

The deal is valued at $60.50 a share and includes $17 billion in equity from Stripe, Advent and Block, CNBC reported.

PayPal, Stripe, and Advent declined to comment. Block did not respond to a request for comment by the time of publication.

PayPal helped revolutionize consumer-to-consumer and consumer-to-merchant payments. Once the payments unit of eBay, PayPal soared to a $360 billion market cap in 2021, when the Covid-19 pandemic forced many businesses to operate digitally.

PayPal’s share price has dropped more than 80% since the middle of 2021. In April, PayPal reorganized into three business units, and it reportedly plans to eliminate about 20% of its employees over the next few years. In March, the company brought in new CEO Enrique Lores after a review by the board of directors found “the pace of change and execution was not in line with the [b]oard’s expectations.”

PayPal still has some very attractive assets, like Venmo, which allows for peer-to-peer payments between users, Dan Dolev, a senior analyst at Mizuho Americas, the corporate and investment banking arm of Mizuho Financial Group, said. Branded checkout, where consumers use the PayPal button to make payments on a merchant’s website, delivers the “fattest margins” for the fintech, Dolev said. “[PayPal] can charge websites north of 3% for that transaction,” he told CFO Brew.

While branded checkout is PayPal’s “most attractive business,” it’s also the one with the most competition, Dolev said. Apple Pay, Google Pay, Shop Pay (owned by Shopify), and Cash App are big players in the space, he said.

PayPal’s “business is slowing and there’s not much they can do with it,” Dolev said. “They’re sitting in between a really good asset that is very hard to monetize, and a melting ice cube that continues to melt—and it might actually be melting at a faster pace over time—which is the branded checkout,” he said.