Why the PayPal takeover fell apart
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Stripe's efforts to buy PayPal might have died the moment PayPal reported Q2 earnings, even if the bid remained active for another month.
The big picture: Stripe and private equity partner Advent International based their $60.50 per share bid on PayPal's value before the first news reports of a possible deal.
- PayPal, meanwhile, believed that subsequent price appreciation was mostly due to its own performance — which meant $60.50 was way too low.
Timeline:
- Feb. 24: Bloomberg reports on a possible deal. Shares open that morning at $43.49 and close at $47.02.
- Feb. 26: Semafor pours cold water on the deal, saying the two sides weren't in talks. Shares fall back to $45.53.
- March 1: Enrique Lores takes over as PayPal CEO.
- Early April: Stripe and Advent approach PayPal about a deal, but don't get a response. It doesn't leak.
- April 29: PayPal announces a corporate reorganization. Shares close the month at $50.14.
- May 5: PayPal reports Q1 financials. It beats on earnings, misses on revenue and maintains guidance. Shares close at $46.49.
- July 14: Reuters reports late in the evening that Stripe and Advent have offered to buy PayPal for $60.50 per share, a 39% premium to the pre-Bloomberg report price. Shares open 16% higher the next morning at $54.85.
- July 29: PayPal reports Q2 financials, beating on both earnings and revenue. Shares rise only slightly, closing at $58.35, but up 3% from the prior day's open of $56.76.
- Aug. 13: The share price surpasses Stripe and Advent's bid, closing at $60.59.
- Aug. 27: Stripe and Advent walk away, and PayPal shares tumble 12% at the next morning's open and have kept sliding. Yesterday it closed at $52.66.
Behind the scenes: Sources suggest that negotiations kept coming back to the divergent opinions of why the share price was rising.
- Stripe thought it was because of its acquisition interest, whereas PayPal thought it was because of a turnaround plan that was delivering results.
Zoom in: Both sides have some evidence in their corner.
- For Stripe, it's the stock price bumps after acquisition reports, and the big drop since last Thursday. For PayPal, it's the premium before last Thursday — suggesting investors believed a sweetened bid was in order.
- Stripe has the slightly better case, just based on the preponderance of movement.
Look ahead: It's still possible the two sides come back to the table, although a likelier M&A outlook involves PayPal divesting some noncore businesses.
The bottom line: This would have been the largest merger ever in the payments space, but it collapsed over how much to pay.
