Shares in PayPal Holdings (Nasdaq: PYPL) are skyrocketing in premarket trading this morning after a report that the legacy digital payments platform has received a joint buyout offer from one of today’s most successful fintech companies and a major private equity firm. Here’s what you need to know.
What’s happened?
Early this morning, Reuters reported that the fintech giant Stripe and the private equity giant Advent International have offered to buy PayPal for well above its closing stock price on Tuesday.
According to Reuters, Stripe and Advent made PayPal a buyout offer of $60.50 per share, equating to about $53 billion in total. That $60.50 per share offering price is roughly 28% higher than PayPal’s closing price of $47.37 yesterday.
Stripe and Advent reportedly made the offer to PayPal earlier this month. It is an offer that PayPal has reportedly not responded to yet.
While Reuters did identify its sources, other than saying they were people “familiar with the matter,” news of the proposed buyout offer could put pressure on PayPal leadership to publicly respond—and face displeasure from PayPal investors if they do not like the company’s response.
Fast Company has reached out to PayPal, Stripe, and Advent for comment.
What do Stripe and Advent want with PayPal?
The report didn’t go into specifics about what Stripe and Advent would do with the legacy online payments giant should they acquire it, but Reuters said that the two suitors would jointly own PayPal instead of breaking up the company.
Stripe is one of the biggest players in the modern fintech scene. The privately held company was valued at around $159 billion in February. But Stripe’s specialty and core business is facilitating transactions between a business’s bank account and a customer’s payment method.
One of PayPal’s strengths is facilitating peer-to-peer transactions. It also has a massive user base of consumers and small businesses that trust the brand and are loyal to it.
It is possible Stripe sees a PayPal acquisition as a way to move into areas of the fintech space where PayPal clearly dominates.
Would PayPal sell itself?
No one can answer that but PayPal leadership. However, a buyout offer could be attractive to PayPal’s board and investors, considering the company has struggled in recent years.
While PayPal was the de facto payment backbone of consumer e-commerce for roughly the first two decades after its founding in the late 1990s, in recent years the company has lost ground to competing products like Apple Pay and Google Pay, which make it much simpler to pay digitally for products and services right from smartphones and other devices.
While PayPal’s stock did see a massive boost during the pandemic years, when online shopping boomed like never before, it has tumbled since then.
In 2021, PayPal stock was trading at more than $291 per share—an all-time high. As of yesterday’s closing price, PYPL shares were trading at just above $47. That stock price decrease came as a result of newer technologies and more competition that siphoned away business.
In February of this year, PayPal replaced its CEO, Alex Chriss, with HP’s Enrique Lores.
“The payments industry is changing faster than ever, driven by new technologies, evolving regulations, an increasingly competitive landscape, and the rapid acceleration of AI that is reshaping commerce daily,” Lores said at the time. “PayPal sits at the center of this change, and I look forward to leading the team to accelerate the delivery of new innovations and to shape the future of digital payments and commerce.”
How have PayPal’s shares reacted?
Investors have reacted very well to the reported buyout offer. As of the time of this writing, PYPL shares are currently up around 19.87% to $56.72 in pre-market trading.
That’s well above PayPal’s closing price of $47.37 yesterday, but still slightly under Stipe’s and Advent’s reported offering price of $60.50 per share.