PayPal (PYPL) shares declined 0.4% in after-hours trading on Thursday after Reuters reported the company's board considers the $53 billion takeover offer from Stripe and Advent International inadequate. The board believes the $60.50-per-share proposal undervalues PayPal and is evaluating financing certainty, regulatory risks, and the time required to complete a deal. PayPal continues to face competition from Apple Inc.'s (AAPL) Apple Pay and Alphabet Inc.'s (GOOGL) Google Pay while working to revive growth in its core checkout business.
PayPal Board Cites Undervaluation and Deal Execution Risks
PayPal's board is evaluating the offer alongside management's turnaround strategy and the possibility that competing bids could emerge, according to the Reuters report. The board's preliminary view is that the $60.50-per-share proposal does not fully reflect the value PayPal could create if management successfully executes its strategy. The board is also considering factors beyond valuation, including financing certainty, potential regulatory hurdles, and what could be a lengthy timeline to complete any transaction. The board is scheduled to hold additional meetings and has not yet formally responded to the proposal.
PYPL shares ended Thursday's regular session up 2.18%. Investors will watch PayPal's July 28 earnings report for evidence that its core checkout business is stabilizing after the company issued a weaker-than-expected outlook earlier this year.
Stripe and Advent Secure $50 Billion Financing for Joint Ownership Structure
JPMorgan and Morgan Stanley arranged around $50 billion in financing for the consortium and are also advising the bidders, according to Reuters. Stripe and Advent are contributing $17 billion in equity toward the proposal. Under the offer submitted earlier this month, Stripe and Advent would jointly own PayPal with equal stakes rather than break up the company.
Block, which initially joined Stripe and Advent in approaching PayPal in April, exited the consortium before the latest offer was submitted. Sources told Reuters that Stripe and Advent remain the most serious bidders for the company and are still interested in reaching an agreement.
PYPL Stock Drops After-Hours as Retail Sentiment Remains Bullish
On Stocktwits, retail sentiment for PYPL was "extremely bullish" with message volume being "extremely high" at the time of writing. Over the past seven days, message volume around the stock surged 585%, while the ticker's watcher base rose 0.4% in the same period. Stocktwits retail investors say the reported $60.50-per-share takeover offer undervalues the payments company.
PYPL shares have fallen around 5% year-to-date.
FAQ
Why did PayPal's board reject the $53 billion takeover offer?
PayPal's board views the $60.50-per-share proposal from Stripe and Advent International as inadequate because it believes the offer undervalues the company. The board is also weighing financing certainty, potential regulatory hurdles, and the time required to complete the transaction.
How much financing have Stripe and Advent secured for the PayPal bid?
JPMorgan and Morgan Stanley arranged around $50 billion in financing for the consortium. Stripe and Advent are contributing $17 billion in equity toward the proposal and would jointly own PayPal with equal stakes under the submitted offer.
What happened to PYPL stock after the board's response was reported?
PYPL shares declined 0.4% in after-hours trading on Thursday after Reuters reported the board's view. The stock had ended Thursday's regular session up 2.18% and has fallen around 5% year-to-date.
