PayPal Stock Slide Triggers Major Acquisition Interest

Rumblings of a takeover at PayPal are swirling following a major decline in its stock that eliminated almost half of its value.

One company looking to buy PayPal is interested in the whole company. Other potential buyers only want to purchase some of PayPal’s assets. These takeover discussions are in the preliminary stages, according to Bloomberg. 

Paypal Holdings Inc., founded in the late 1990s and a leader in digital payments, now faces a more crowded field from competitors, including Apple Pay and Google Pay.

In addition to losing market share to rivals, PayPal has seen its stock plummet. Over the past 12 months, PayPal shares have lost almost half their value, Bloomberg reports. 

Board chair Enrique Lores is due to take over as PayPal President and Chief Executive Officer on March 1. Former Chief Executive Officer Alex Chriss was ousted in January after his plans to turn PayPal around did not succeed.

Chriss was asked to leave on the same day a disappointing quarterly report came out. After the report, PayPal’s stock declined by about 17%.

PayPal’s stock woes reflect concerns about the company’s growth, the tough competition from Apple and Google, as well as execution challenges. But there is some good news. PayPal’s stock rose by 5.8% on Monday on hopes of a takeover, according to MarketWatch. 

Former PayPal President David Marcus summed up a lengthy LinkedIn post about the company with this statement.

“Over time, the company that had every advantage and could’ve become the most consequential and relevant payments company of our time, lost its mojo, its product edge, and its ability to compete in a market that’s being rewired and reinvented in front of our eyes,” Marcus wrote.

“That’s the part that’s hardest to watch for a company I care so deeply about.”

PayPal’s checkout solutions and checkout volume take up transactions that would ordinarily go to credit cards, so credit card issuers have their eyes on what happens at PayPal.

A breakup or takeover would change the payments landscape in terms of strategies for merchant acceptance, reward partnerships, and competition for market share among digital wallets.

At PayPal, branded checkout accounts make up almost half of PayPal’s profits, but there has been a slow down in these profits in the past four quarters — evidence that PayPal’s hold at the checkout may be slipping making room for new competitors.

A PayPal buyer might expand one of PayPal’s credit products or spin off a new product. Credit card issuers could partner with these new credit offerings or face them as new competition. The new deals may bring changes in rewards points, financing at the checkout, and co-branded credit card rewards. 

Talk of a takeover at PayPal has emerged after a major decline in its stock that eliminated almost half of its value in the past year. One potential takeover would buy the whole company. But there are other talks about buying specific PayPal products. 

Credit card issuers would be wise to keep a close eye on what happens next at PayPal. A PayPal buyer could spin off a brand new credit product or expand on a current PayPal offering. Credit card issuers could partner with these new credit products or face them as competition.