PayPal shares sink as $53 billion Stripe-Advent buyout collapses

PayPal Holdings shares plunged in early trading Friday after Bloomberg News reported that a buyout consortium led by private equity firm Advent International and payments processor Stripe had abandoned its months-long pursuit of the company, ending what would have ranked among the largest leveraged buyouts attempted in years.

The stock opened down roughly 12% at $53.78 after falling as much as 16% in premarket trading, according to Yahoo Finance's account of the premarket move. PayPal closed Thursday at $61.47. Stripe, Advent and PayPal all declined to comment on the report.

The numbers

The consortium had offered $60.50 a share, or roughly $53 billion, for PayPal, a bid first reported by the Wall Street Journal in mid-July and confirmed by continuing negotiations through mid-August. PayPal's board considered the price inadequate and had also flagged regulatory and financing hurdles as concerns, according to people familiar with the deliberations. The stock had climbed nearly 30% since the offer first surfaced, pushing PayPal's market capitalization to roughly $53 billion at Thursday's close — almost exactly in line with the rejected bid, and a fraction of the approximately $360 billion valuation the company commanded at the height of pandemic-era online spending in 2021.

The collapse also comes weeks after PayPal's second-quarter earnings report, which beat Wall Street expectations. Net revenue rose 5% to $8.68 billion, non-GAAP earnings per share came in at $1.38, and total payment volume climbed 10% to $486.4 billion. The company used the results to raise its full-year non-GAAP earnings guidance to roughly $5.38 a share, up from a prior outlook that had called for results ranging from a slight decline to modest growth, according to the earnings release filed with securities regulators. The company also reported $15.3 billion in cash, cash equivalents and investments against $13.4 billion of debt as of June 30, and said it returned $1.5 billion to shareholders in the quarter through share repurchases, alongside a quarterly dividend of 14 cents a share.

How the deal came together, and apart

The takeover approach followed a turbulent stretch for PayPal's leadership. The company's board removed Alex Chriss as president and chief executive in early February, replacing him with Enrique Lores, the former chairman and chief executive of HP Inc., effective March 1, according to a filing PayPal made with the Securities and Exchange Commission at the time. The board cited a pace of change and execution that had not met expectations, particularly around PayPal's branded checkout business, which had lost ground to wallet products built directly into smartphones by Apple and Google.

The pressure on PayPal predates Lores's arrival. The company has struggled to regain its footing since the pandemic-era surge in online shopping and digital payments faded and consumers returned to brick-and-mortar stores, eroding growth rates that once justified its 2021 peak valuation. Over the past several years PayPal has responded with successive rounds of management reshuffles, workforce reductions and a shift toward higher-margin products such as Braintree's unbranded processing and Venmo, both of which Lores cited as bright spots in the second-quarter results.

Lores moved quickly. On April 29 PayPal announced a reorganization into three operating units — Checkout Solutions & PayPal, Consumer Financial Services & Venmo, and Payment Services & Crypto — alongside a round of executive departures, saying the goal was "getting much closer to the consumer" and simplifying how the company operates, according to the company's own announcement of the restructuring. Lores has separately framed the broader effort as an attempt to make PayPal "a technology company again."

It was against that backdrop, with the turnaround still unproven but underway, that Stripe and Advent approached PayPal over the summer. Talks reportedly continued even after the board's initial rejection, with people close to the process suggesting in mid-August that a revised deal could still come together within weeks. Instead, PayPal's strong quarterly results and the resulting stock rally appear to have pushed the price a fresh offer would require out of reach for the buyers, according to accounts of the talks' collapse.

Who is affected, and what analysts are saying

The immediate impact falls on PayPal shareholders, who had bid the stock up in anticipation of a deal and now face a sharp repricing without a takeover premium attached. It also closes off, for now, one path for Stripe to gain instant scale in consumer payments and branded checkout, areas where PayPal still holds a large base of merchants and roughly 439 million active accounts. For Advent, the deal would have ranked among the largest leveraged buyouts ever attempted, requiring a debt package well into the tens of billions of dollars to finance a company still generating meaningful free cash flow. For Stripe, which remains privately held and has built its own consumer-facing checkout and Link products in recent years, ownership of PayPal would have delivered an instant, publicly listed foothold in branded checkout and a merchant network built over more than two decades — without the scrutiny of an initial public offering.

Some deal analysts framed the outcome as validation of the board's decision to hold out.

"Given that backdrop, PayPal has a credible argument that US$53 billion does not fully reflect the value of its platform, brand and user base," said Troy Hooper, co-head of ECM US at Mergermarket. "The company does not necessarily need to demonstrate a successful turnaround before demanding a higher price. That said, sustaining that position will ultimately require management to prove the turnaround can translate into stronger growth and earnings."

On PayPal's most recent earnings call, Lores did not directly address the takeover speculation but said the company would consider any strategic option it believed would create superior value for shareholders. In the earnings release itself, he struck a similarly forward-looking tone, saying he was "encouraged by the progress we made this quarter" and that the company "moved with urgency to sharpen our transformation plan and advance our growth strategies across our three businesses," pointing to stabilizing branded checkout and momentum in Venmo and Braintree.

What happens next

With the Advent-Stripe consortium out of the picture, PayPal's near-term trajectory now rests on Lores's cost-cutting and restructuring plan rather than a sale. The company has not disclosed whether its board is entertaining other suitors, and neither Advent nor Stripe has indicated an intention to return with a higher offer. PayPal is scheduled to hold its third-quarter earnings call on October 27, which will give investors the next formal checkpoint on whether branded-checkout stabilization, Venmo growth and the cost-savings program are translating into the kind of durable earnings growth that Hooper and other analysts say the company will eventually need to show to justify trading above the price Advent and Stripe were willing to pay. Until then, PayPal shares are likely to trade on the same fundamentals — and the same competitive pressure from Apple, Google and other checkout rivals — that prompted the board to entertain a sale in the first place.