Stripe's $53 Billion PayPal Bid Died. The Stock Is Now a Bet on Its CEO

Stripe abandoned PayPal this week. That is a stranger headline than it sounds, because Stripe is not, on the whole, trying to get away from PayPal. Stripe is the payment processor whose checkout page offers merchants a PayPal button; it competes with PayPal for a merchant's checkout business while, in the same flow, routing that merchant's PayPal transactions to PayPal's rails. Rival, and in a sense supplier. This summer, Stripe tried a third category: buyer.

On July 14, Stripe and the private-equity firm Advent International offered $60.50 a share — about $53 billion, a 28% premium — to take PayPal private. On Thursday evening, people familiar with the matter said, the consortium decided to abandon the pursuit. PayPal's stock, which had drifted up to roughly the offer price over the previous week, fell about 13% Friday, to the low $50s. The bid was not rejected; the bidders left. And because neither side announced why, the market is left to reconstruct what happened — which is worth doing, because the same forces that killed this deal now determine what PayPal is worth on its own.

The machine

Start with who was buying. Stripe, the closely held payments giant founded by the Collison brothers and valued at $159 billion earlier this year, and Advent, a large Boston buyout firm, would have taken PayPal private together — Stripe and Advent had agreed to own it in roughly equal halves, with an explicit pledge not to break the company up. That is a classic consortium structure, and it is how a potential buyer says "this is a strategic merger, not a strip-and-flip." A leveraged buyout is a deal financed mostly with borrowed money, the target's own cash flow doing the repaying; here, reports had about $50 billion in committed bank financing behind a deal Bloomberg said would have ranked as one of the biggest leveraged buyouts ever.

Why would a payments company buy its biggest rival? The logic is vertical. Stripe processes a large share of the checkout plumbing for modern online merchants; PayPal brings the consumer side — roughly 440 million accounts, the Venmo peer-to-peer network (67 million monthly users, and revenue up 20% last year), Braintree, and PayPal's own stablecoin. Combined, the two would handle on the order of $3.7 trillion a year in payment volume. Put the plumbing and the wallet under one roof, and the machine gets to see both ends of nearly every transaction it touches.

That is also, almost precisely, why the deal was in trouble from the start.

The three tripwires

The board's public posture over the six weeks gave away the first problem. PayPal's board viewed the $60.50 offer as undervaluing the company, with financing and regulatory hurdles on top, and by mid-August the company had gone from declining an offer to negotiating a potentially higher price. Then the consortium walked. Somewhere between "pay more" and "we won't," the gap simply never closed.

The other two tripwires are what made "pay more" so hard. One is antitrust. Stripe's merchant infrastructure combined with PayPal and Venmo's consumer wallets would put one company on both sides of most online checkouts, control that regulators are likely to see as foreclosure of rivals. The analysis that followed the bid predicted the fix would be divestitures — selling off Venmo or Braintree — which is another way of saying the regulators would strip out the consumer network that was the entire point of buying. The strategic asset and the regulatory tripwire were the same asset.

The third is financing. This bid needed roughly $50 billion of debt, and it needed that debt at exactly the moment the bond market was having one of its worst stretches in years — the 10-year Treasury around 4.7%, the 30-year above 5.2%, levels not seen since the mid-2000s, with persistent inflation and heavy government borrowing behind the move. "Financing certainty" was one of the reasons the board named. The arithmetic is harsh: to close the gap with a seller that wanted more, the buyers had to add leverage just as leverage got more expensive, on top of the risk that regulators would make them give back the asset that justified the price.

What's left

The premium has now largely leaked out of the stock, but not all of it. PayPal is worth about $46 billion at Friday's close, against the roughly $53 billion valuation the offer implied — about $7 a share gone — yet it still trades a bit above where it was before the bid leaked in July. That residual is the market leaving the door open, either for some revival of the buyout or for the standalone story the board just bet on.

And a bet is what it is. PayPal trades at about 9x forward earnings and roughly 7x EBITDA — cheap for a name that used to compound; appropriately priced for one whose signature branded checkout grew just 1% in last year's fourth quarter. The disagreement over what the company is worth remains enormous. Morgan Stanley — reportedly among the banks financing the bid — had its equity research unit rating PayPal Underweight with a $34 price target while arguing a sale was PayPal's most credible path to value realization. Deal people and research people in the same building, on opposite sides of the same ticker: from $34 to $60.50 is a wide range, and it is the range you get when a stock's value depends on execution rather than on a multiple.

That execution is now the whole case. CEO Enrique Lores, the ex-HP chief who took over in March, has split PayPal into three reporting units — checkout, consumer financial services plus Venmo, and payment services plus crypto — with targets of double-digit earnings growth, alongside $1.5 billion of planned cost cuts. He has said there is "no problem" remaining independent. The board's refusal of a 28% premium was, in effect, the board betting the farm on him: if the plan works, Friday's crash was the market's mistake, but if it does not, the $60.50 offer was the whole game and the premium has further to fall.

The machinery, for what it is worth, is not fully closed. PayPal has hired advisers to examine strategic alternatives, and Lores keeps using the phrase "optimizing our portfolio," which Wall Street reads as keeping the option to sell pieces — Venmo now sits in its own reporting line, visible and priceable on its own. A full buyout may be gone, but a company that refuses to sell at a premium and then treats its most valuable unit as a separately valued asset has not left the deal table; it has just moved to a different seat. The catch is that any buyer who comes back will want to pay less than $60.50, and the leverage that made the first bid possible will cost more. For a shareholder, the cleanest summary is that the floor the bid put under the stock is gone, and what remains is a CEO with something to prove and a stock market that will not believe him until the numbers arrive.