PayPal responds to Stripe’s $53 billion offer: willing to consider, but not at that valuation.

      PayPal has finally responded to the $53 billion offer on its table, stating that it is not acceptable at that price. The company made its first public statement during Tuesday's Q2 earnings call, which also revealed a positive earnings result. Chief Executive Enrique Lores refrained from commenting directly on the bid from Stripe and Advent, mentioning that PayPal would "carefully consider" any option that would provide "greater value for our shareholders than our current strategy." He asserted that he did not believe Stripe's offer met that threshold.

      PayPal has previously dismissed the bid as too low, and the latest results provided justification for this stance. Stripe and Advent have proposed $60.50 per share, while Lores indicated on his LinkedIn that he feels "encouraged by the progress" and has "strong conviction in our direction."

      He has some figures to support his viewpoint. Cantor has placed PayPal's value closer to $70 per share, significantly above the current offer, with the stock trading around $58. Even from a positive perspective, $60.50 undervalues the company if the turnaround succeeds.

      The earnings report supported this view, as revenue increased by 5% to $8.68 billion, surpassing expectations, and adjusted earnings of $1.38 per share exceeded the anticipated $1.28. Net income decreased to $1.1 billion, but PayPal upgraded its full-year guidance, now forecasting growth for a key profit metric this year, according to the Wall Street Journal.

      However, there is a caveat. Transaction-margin dollars rose only 1%, hindered by declining interest on customer balances as rates softened. Excluding this factor, the underlying figure grew by approximately 3%. The payments segment performed better than the overall figures suggested, and shares climbed around 4%.

      This entire situation hinges on a turnaround that is still in progress. Lores has reorganized PayPal into three divisions, aiming for $1.5 billion in run-rate savings over the next two to three years, and is laying off about 20% of the workforce while integrating AI into coding, support, and risk management. He refers to this as “improving execution.”

      The challenge lies in the expectations being set. PayPal has not initiated a public auction, which is typically the method to determine the actual worth. Instead, it is asking shareholders to have faith in its strategy. As noted by The Information's Martin Peers, that is a considerable expectation from a board that owns roughly 0.6% of the company, especially given that the stock has plummeted about 80% since 2021 and the CEO, who took the helm in March, has never led a payments firm before.

      Interestingly, Stripe, the competitor responsible for partially positioning PayPal as a laggard, is flush with cash and actively acquiring companies as part of a broader trend in payments consolidation. For a company aiming to transform online money movement, acquiring the established player would be a shortcut. However, for now, PayPal prefers to rely on its own strategy and challenges Stripe to increase its offer.