PayPal's board reportedly views the $60.50-per-share cash offer from Stripe and Advent International as inadequate. The stock trades at about $56, roughly 7% below the bid, while the average analyst price target of about $53 sits under both figures. PayPal reports second-quarter results on Tuesday, July 28.
PayPal's directors reportedly consider the $60.50-per-share cash offer from Stripe and private equity firm Advent International inadequate, according to multiple reports. That view implies they value the company above a bid that valued the payments specialist at more than $53 billion.
PayPal has not publicly responded to the proposal. Reports say board discussions have centered on whether the bid is high enough to warrant opening negotiations at all.
Where the $60.50 offer came from
The bid arrived with roughly $50 billion in committed bank financing. Its offer price represented a 28% premium to where PayPal traded before news of the bid broke on July 15. Shares jumped 17% that day and closed at $55.52.
Reports suggest the bidders may raise their offer rather than walk. Michael Burry, a PayPal shareholder, publicly called the offer an opening bid and pegged the company's value far higher.
Two prices sit below the bid
Yet the market is less convinced. At about $56, the shares trade roughly 7% below the offer price — almost exactly where they settled when the bid became public. That discount prices the risk that talks collapse, financing slips, or regulators balk, and the bidders have reportedly weighed possible antitrust remedies including separating PayPal's Braintree business and transferring it to Advent.
If the deal died tomorrow, the stock would likely head back toward its pre-offer price of $47.37. The average analyst target of about $53 sits below the current share price, with the stock already trading at about 10 times earnings. PayPal's market capitalization sits near $49 billion, below the more than $53 billion the buyers put on the table.
Flat user growth behind the skepticism
First-quarter revenue rose 7% year over year to $8.4 billion, and total payment volume climbed 11%. But transaction margin dollars — the company's preferred measure of transaction profitability — grew just 3%. Active accounts were 439 million, up only 1% from a year earlier and down slightly from the prior quarter.
Management's full-year guidance calls for adjusted earnings per share ranging from a low-single-digit decline to slightly positive. Therefore the next card turns over quickly: PayPal reports second-quarter results on Tuesday, July 28.
Source: Fool
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