PayPal tumbles as Advent, Stripe said to drop $50 bln pursuit

Investing.com-- A consortium of buyout firm Advent International and payments processor Stripe has abandoned its pursuit of PayPal Holdings (NASDAQ: PYPL), Bloomberg News reported on Thursday evening, sending the payment company’s shares sharply lower in extended trading.

The group had previously offered more than $50 billion for PayPal, the report said, citing people familiar with the matter. PayPal’s board was looking for a higher price.

PayPal shares dropped 17% to $50.98 in pre-open trading Friday.

The deal interest emerged after PayPal’s shares fell sharply, with Stripe considering a purchase of part or all of the company.

The takeover speculation, along with stronger-than-expected second-quarter earnings, has since helped lift PayPal’s stock more than 40% this quarter, giving the company a market value of about $52.6 billion, Bloomberg reported.

PayPal replaced Chief Executive Alex Chriss with Enrique Lores in March as the digital payments pioneer seeks to revive growth and modernize its business amid competition from Apple and Alphabet.

The consortium could potentially return with another offer if circumstances change, it was added.

With a deal now off the table, analysts note the focus will shift back to fundamentals. Mizuho’s Dan Dolev said PayPal faces challenges on 3 major fronts: (1) Branded checkout is increasingly facing commoditization risk. (2) Germany, where PYPL is the dominant player, is seeing growing risk of share loss. (3) Venmo, arguably the prime asset Stripe would have acquired, faces a potential disruption risk from Elon’s X-Money, which could chip away with high deposit yields and global ubiquity.

"While branded growth showed stability in 2Q, we believe this was largely a function of stable discretionary spend, plus at ~2% growth is still meager in absolute terms," Dolev commented. "We remain on the sidelines."

You May Also Be Interested In

• Exclusive: PayPal cuts 220 jobs in India, 160 in Ireland
• UBS Downgrades Lai Yih Footwear Co Ltd (6890:TT) to Neutral
• JPMorgan Upgrades Aeroports de Paris (ADP:FP) (ARRPY) to Overweight