A deal that could have exceeded US$50 billion and entered the history of leveraged buyout failed because the other party's stock price rose too fast. According to Bloomberg, people familiar with the matter revealed that payment platform Stripe and private equity fund Advent have no longer advanced their plans to acquire PayPal, which is in contrast to the acquisition news reported earlier this month.
Time goes back to July this year, when PayPal's stock price was at an all-time low, with a market value of approximately US$40 billion. The acquirer composed of Stripe and Advent made an offer of approximately US$53 billion at this time, which is a typical "buying at the low price" operation. The report pointed out that the bid was rejected by PayPal, and Stripe was subsequently said to be preparing to raise a higher offer. By comparison, PayPal's market value was as high as $320 billion at the peak of the COVID epidemic. Today's low valuation is the starting point of this acquisition story.
But the turning point occurred in the financial report handed over by PayPal itself. The performance of the latest quarter's financial report exceeded most market expectations, and coupled with the imagination brought by the acquisition rumors themselves, the combination of the two factors pushed PayPal's stock price up by 40%. As soon as the stock price rises, the acquisition plan originally set near the historical low becomes invalid - the bid supported by the leveraged buyout cannot withstand the increase of the target company on its own.
PayPal was also taking action at the same time. New CEO Enrique Lores, who took office in March this year, has begun to split the company into three business units, focusing on checkout, Venmo, and payment and cryptocurrency businesses. If the merger of Stripe and PayPal really comes to fruition, the significance to Stripe is not just the buyout itself: this transaction had the opportunity to reduce Stripe's dependence on credit card networks such as Visa and Mastercard, and at the same time allow Stripe to directly integrate the checkout system and cryptocurrency functions of PayPal's Venmo to make up for the missing piece of its territory.
The current status of this transaction is that it is suspended rather than completely terminated. Bloomberg reported that Stripe and Advent may still make renewed attempts to acquire PayPal in the future. As for what price the next bid will be and how PayPal's third-line restructuring will affect the company's valuation, there is currently no further information.
