Last Tuesday, Stripe and private equity firm Advent International made a joint offer to buy PayPal for $60.50 a share (more than $53B), a roughly 28% premium to PayPal’s most recent closing price before the offer was made. If approved, the two companies would jointly own PayPal with equal stakes rather than break it up.
Two days later, Reuters reported that PayPal’s board saw the $53B takeover bid as undervaluing the company, noting that it would also likely face regulatory and financing hurdles. The board is expected to meet today (Monday) to discuss the offer, though sources say acceptance isn’t likely.
I first reported on the potential offer in March, back when it was just a rumor reported by Bloomberg. This was about one month after PayPal announced the appointment of Enrique Lores as its new President and CEO, right as he was taking the reins.
As mentioned earlier this year, I’m highly against the acquisition for several reasons:
- The offer seriously undervalues PayPal. Even at a 28% premium, Stripe would be getting a steal in my opinion.
- PayPal / Venmo have a combined 540M wallet users and bring an entire peer-to-peer ecosystem to Stripe that would otherwise take it years to build.
- PayPal is at the beginning stages of growing an ad network, a high-margin vertical that Stripe would also inherit, alongside the decades of consumer purchase behavior data that PayPal brings to the table to power that ad network.
- I don’t want a payment processing monopoly. I want competition in the market, which Stripe and PayPal currently bring to each other. It’s already hard enough for a startup payment processor to compete in the market with either Stripe or PayPal, let alone the combination of the two.
- It’d also be a loss for merchants, who, in many cases, would have nowhere to go if their relationship with Stripe went sour (which it’s known to do).
- And on a personal note… I’m way too invested in PYPL because I have high aspirations for the company. I don’t want cash for my PYPL stock, which I would most likely receive as a retail investor. I want Stripe equity, which there’s no way I would get.
- I also don’t want a 28% premium on my PYPL. I want to see the 10+ year upside to PayPal’s valuation, which is why I heavily invested in the stock in the first place.
The merger of Stripe and PayPal is bad for merchants, bad for consumers, and overall bad for the market. PayPal should outright reject the offer (which they might have already done by the time this edition publishes). And if they were to accept this or a subsequent better offer, it should be blocked by antitrust regulators in the U.S. and EU as anticompetitive.
What are your thoughts on a Stripe-PayPal merger? Hit reply and let me know.
