Does PayPal Have a Buyer?
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What is the main topic discussed in this episode?
PayPal may finally have a buyer. Motley Fool Hidden Gems Investing starts now. Welcome to Motley Fool Hidden Gems Investing. I'm Travis William, joined today by Lou Whiteman and Rachel Warren. And guys, we may finally have a deal for the company that has been kind of on the block, kind of a value stock, kind of a what in the world are they doing there? PayPal. So Rachel, what did we find out this morning and overnight about Stripe potentially buying the company?
major breaking news report. So payments giant Stripe and private equity firm Advent International have reportedly submitted a joint confidential proposal to buy PayPal for $60.50 a share. That would value PayPal at over $53 billion. As of the stock's closing price yesterday, that was a 28% premium based on their share price at the time. The deal is reportedly backed by about $50 billion in committed bank financing. Now, what's interesting about this is under the terms of the proposal, both Stripe and Advent would take equal stakes to run PayPal as a 50-50 joint partnership. And the idea would be to keep the company intact rather than breaking it up or selling off its core assets. Going back to that $53 billion valuation based on the reported terms of the offer,
This is tracking to be larger than the years ago Musk's purchase of Twitter for $44 billion. But it also really highlights how far PayPal has fallen from its pandemic era peak back in 2021. I mean, back in those days, it posted a market cap of about $360 billion. This is interesting, right? I mean, this is in the middle of what some might call kind of a chaotic internal transition for PayPal. They've got the new president and CEO. He's been pushing a turnaround plan targeting over a billion in cost savings. Now for Stripe, this is still a private company. We've heard a lot of reports that they might go public in the last few years. Their private valuation is reportedly around $160 billion. So absorbing PayPal could really be a massive way to scale their footprint, obviously grants them access to hundreds of millions of active
consumer accounts. It would match that consumer brand that PayPal has with Stripe's backend developer infrastructure. Could also hand them a place within the digital currency race as they absorb PayPal's stablecoin into their ecosystem. Now, we haven't seen any response from PayPal, you know, formally responding to these initial overtures.
What are the reported terms of Stripe and Advent’s offer for PayPal?
Wall Street seemed happy in early trading, but there's still a lot that we don't know, guys.
Yeah, Lou, that is the thing here is if you squint, some of this makes a little bit of sense, but then you look at the structure, 50-50 deal, Stripe is kind of buying PayPal and kind of not, can't exactly fold it into your current business, at least seamlessly. This also puts Stripe in a little bit of a strange position because a lot of the payment companies have built on top of Stripe and now you're a competitor with PayPal. What should we think about this strategically and how does the private equity piece of this Play into it in your mind.
Yeah, a lot of thoughts here. I mean, for once, so Stripe is kind of building their own PayPal. So I guess they don't worry about the competition as much as I do. I think you're right. I think that would be kind of an awkward conversation, but they either feel like they have to get there. So they just need to or they're not worried about that. Here's the thing. There is value in PayPal. There really is. It's a good brand. I don't particularly like the stock. I don't think this is going to work. For one thing, you always with these things, somebody leaked it. Who leaked it? And it's the acquirers who leaked it. The offer was made a month ago or so.
That was the other thing that stuck out to me is it's apparently been on the table for a while.
Yeah, this is trying to light a fire under PayPal to get a response. And here's the thing. The value in PayPal for me right now is their cash flow. Six billion of free cash flow.
How would a 50-50 Stripe–Advent partnership keep PayPal intact and why does that matter?
This is a mature company. This is a company that I don't think has a natural pathway for growth.
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Chapters
5 chapters
1
What is the main topic discussed in this episode?
0:02–2:15
2
What are the reported terms of Stripe and Advent’s offer for PayPal?
2:15–3:39
3
How would a 50-50 Stripe–Advent partnership keep PayPal intact and why does that matter?
3:39–11:26
4
Why might PayPal’s board or shareholders reject a $60.50-per-share proposal?
11:26–14:36
5
How does PayPal’s cash flow and private equity logic support taking the company private?
14:36–19:54