PayPal (PYPL) investors spent much of the summer pricing in the possibility that somebody else will swoop in and fix the company’s valuation problem.
The option is now gone.
A consortium of payment company Stripe and private-equity firm Advent International has withdrawn its bid for PayPal after previously offering $60.50 a share, or about $53 billion. PayPal shares fell 12.7% to $53.66 Friday as the deal premium was quickly sliced out of the stock.
The selloff was pretty vicious. Some 36 million PayPal shares changed hands, more than twice the stock’s recent average volume.
But the more important number might be $60.50.
The consortium’s original offer was deemed inadequate by PayPal’s board. Bernstein analysts told Reuters they believed management was unlikely to accept a price that wasn’t “meaningfully above $70.”
Now PayPal trades nearly 11% below the $60.50 offer it didn’t take.
That puts a much brighter spotlight on CEO Enrique Lores’ turnaround. PayPal has to demonstrate that continuing on its own can ultimately create a lot more shareholder value than the deal that just evaporated.
PayPal lost nearly $8 a share in one day
The market reaction helps to put a price on how much takeover optimism was priced into PayPal’s valuation.
PayPal ended Aug. 28 at $53.66, off $7.81, or 12.71%. The intraday low was $52.62. Volume was about 36 million shares.
The stock had gained nearly 30% since reports first emerged regarding the Stripe-Advent bid. The buyers were walking away just as word came that PayPal closed at $61.47, Axios reported, actually above their $60.50 offer.
So the failure of the transaction takes away a big support for the shares.
There was also a lot of disagreement behind the scenes on valuation.
Stripe and Advent have offered to buy PayPal at $60.50 per share, valuing the company at about $53 billion. PayPal’s board had considered the first offer too low, and analysts doubted the consortium’s ability to fund a much higher offer.
Regulation might be another barrier.
Related: PayPal stock jumps as two unlikely buyers circle with billions
There is a remarkable historical parallel lurking in those numbers.
PayPal was worth about $360 billion at the height of the pandemic-era digital-commerce boom in 2021.
The abandoned $53 billion proposal valued the business at about 85% below that peak.
And that’s how high the bar has been set for investors’ PayPal expectations.
PayPal now has to prove it was worth rejecting $60.50
The problem with PayPal is not that the company has stopped making money.
That investors haven’t been convinced about its long-term growth.
Shares are trading at about 10.9 times forward earnings, compared to an industry median of nearly 15 times, Refinitiv data shows, according to Reuters.
That works out to a discount of around 27% to the industry median.
More importantly, that discount comes even as PayPal recently upgraded its profit guidance for 2026 and detailed further cost-cutting measures.
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Lores addressed the takeover matter indirectly on PayPal’s July earnings call.
He declined to comment specifically on the reported Stripe-Advent proposal but said PayPal would look at opportunities or strategic alternatives that management believed could better shareholder value.
That standard now works both ways.
If management felt $60.50 was too low for PayPal, investors have a pretty clear benchmark to judge the turnaround by.
PayPal would need to rise about 13% from its Friday close of $53.66 just to return to the price of the offer it rejected.
A rise to $70, the level Bernstein said management might need to see before it gets really interested, would require a roughly 30% jump.
PayPal is fighting Apple and Google for the checkout button
The drama of the takeover can mask the operating problem that led to PayPal’s low valuation in the first place.
PayPal had an odd strength in online checkout. Then the pandemic turbocharged digital commerce and helped its valuation toward $360 billion.
Competition has increased since then.
Apple (AAPL) and Alphabet (GOOGL) have integrated their digital payment services into the heart of their smartphone ecosystems, and Shopify’s Shop Pay has emerged as another major competitor in checkout. Reuters said the homegrown payment options have eaten into PayPal’s core market position.
This is especially important as PayPal’s branded checkout business is higher margin.
Reclaiming market share there will be critical to accelerating PayPal’s growth, Hooper said.
The consumer can easily comprehend the challenge.
Today someone shopping for sneakers or booking a hotel online might see Apple Pay, Google Pay, Shop Pay, credit cards, buy-now-pay-later options, and PayPal on the same checkout screen.
PayPal is no longer simply trying to persuade people to pay digitally. It is fighting to remain the digital button they choose.
PayPal is making a $1.7 trillion AI bet
Another possible growth area that wasn’t around when PayPal hit its pandemic valuation high: agentic commerce.
AI agents could increasingly do parts of the shopping process for consumers, rather than consumers manually searching websites, comparing products, and completing checkout themselves.
PayPal says its existing relationships with consumers and merchants could give it an advantage.
Research referenced in the report estimates the market for agentic commerce could grow to $1.7 trillion by 2030. PayPal surveyed 498 U.S. merchants as part of its effort to understand how businesses are preparing for the transition.
Infrastructure is already being built around the idea by the company.
In August, PayPal announced a “Know Your Agent” concept at the Ai4 conference to extend the same identity-verification principles that support Know Your Customer and Know Your Business to transactions undertaken by AI agents.
PayPal says its decades of experience in identity, fraud prevention, and payments could be valuable if consumers eventually allow autonomous software to spend money on their behalf.
Raymond James analysts told Reuters they believe agentic commerce could be a meaningful opportunity for PayPal given its existing relationships with consumers and merchants, though adoption is still early and competition is nascent.
That opportunity is big, but it doesn’t solve PayPal’s immediate issue.
PayPal’s stock now has to stand on its own
The failed takeover has created a remarkably clean test for investors. Stripe and Advent put an approximate $53 billion valuation on PayPal. PayPal’s board effectively said that wasn’t enough.
Now the stock market values the company at about the same $53 billion, only without a buyer behind that valuation.
Management must therefore show why the business should be substantially more valuable.
There is reason for optimism. PayPal lifted its profit forecast last month, and some analysts have commented positively on Lores’ early moves to turn things around, while agentic commerce could provide another big opportunity in payments.
There are also measurable reasons for caution.
PayPal trades at a big discount on an earnings multiple basis to its industry; branded checkout faces more competition, and its market value of roughly $53 billion is a fraction of the $360 billion investors once placed on the company.
Those problems weren’t created by Friday’s 12.7% decline.
That ruled out the possibility of Stripe and Advent paying to fix them.
For PayPal shareholders the takeover story is over and has been replaced by a much less speculative story: earnings growth, checkout market share, margins, and execution.
Now those numbers will have to justify the price PayPal apparently thought Stripe and Advent weren’t willing to pay.
