Why is the PayPal stock price falling?

A PayPal employee walks past the PayPal logo at the international headquarters in Singapore, Wednesday, March 17, 2010. (AP / Wong Maye-E)

Five years ago PayPal was a Wall Street favorite and a leader in digital payments. Since then the stock has plunged, Apple Pay dominates payment services in the U.S. and PayPal is facing a takeover bid it does not like. What happens next?

The company synonymous with digital payments this past week got a US$53 billion offer to be taken private by upstart rival Stripe and buyout shop Advent International. PayPal’s board is discussing the bid but believes US$60.50 a share is not enough, people familiar with the company said.

It is a comedown for a company that helped to pioneer e-commerce and email-based payments, launching the careers of tech titans Elon Musk and Peter Thiel in the process. Founded in 1998, the San Jose, California, firm was acquired by eBay in 2002 and spun off as an independent company in 2015. Continued growth pushed its market value as high as US$360 billion in 2021.

But since then its growth has slowed and competition intensified, while multiple attempts in recent years to jumpstart its business have borne little fruit.

Dealmakers are now weighing the value of PayPal’s sprawling payments ecosystem, from its 400 million-plus consumer accounts to its merchant checkout business, raising the question of whether the company is worth more as a single entity or as a collection of assets, such as the Venmo peer-to-peer payment app, that could be sold off in pieces.

PayPal declined to comment for this story.

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In February, when the company named a new CEO, it acknowledged a need to address its position relative to competitors and within the broader industry landscape.

“While some progress has been made in a number of areas over the last two years, the pace of change and execution was not in line with the Board’s expectations,” it said in a statement.

Enrique Lores, who took over as CEO in March, has not commented on whether PayPal would pursue a sale.

PayPal misses a beat on new opportunities

While bigger rivals such as Apple AAPL.O, Google and Samsung and upstarts including Stripe and Affirm AFRM.O relentlessly rolled out new ways for consumers and businesses to pay for goods and services, analysts say PayPal was slow to explore opportunities in digital banking and commerce, or to offer fresh options when more people were using their phones to pay.

“Why bother becoming a digital bank if you can just be the world’s biggest checkout button?” said Dan Dolev, senior analyst at Mizuho. “I think it was too easy to drink the honey straight from the checkout jar.”

Investors and industry executives are frustrated with PayPal’s performance, said one source familiar with the company’s deliberations. PayPal started before the iPhone even existed, but last year Apple Pay’s U.S. market share exceeded PayPal’s by 10 percentage points, according to PYMNTS Intelligence, a research company.

PayPal has also lagged many rivals in adopting AI and pushing into agentic commerce, in which AI agents negotiate and complete purchases on a user’s behalf.

Owen Lau, an analyst at financial services firm Clear Street in New York, said PayPal prioritized winning market share by pricing aggressively, but failed to charge enough to generate attractive returns. Clear Street began coverage of PayPal this past week with a hold rating and a price target of US$61 a share, compared with a US$57.09 stock price on Friday.

Lau added that growth has slowed across key parts of the business, including Venmo, while newer products such as buy now, pay later have not panned out. PayPal’s user base has plateaued, he said, making growth a secondary concern to boosting profits from existing customers.

“They just want to win market share,” he said. “They’re not charging appropriately, and they’re losing momentum in other parts of the business.”

The company has had three CEOs in four years and this March embarked on its second turnaround effort since longtime chief Dan Schulman stepped aside in 2023.

Bid may be raised but rival bids seen unlikely

Last year, according to a technology executive familiar with the matter, a deal with OpenAI to embed the PayPal digital wallet and processing into ChatGPT spurred a clash between the board and the executive team led by Alex Chriss, the CEO who succeeded Schulman. Chriss departed following Lores’ appointment, after the board asked to delay the deal.

Still, the board is unlikely to support a deal at US$53 billion, said another person familiar with the company.

Some discussions at the board level have centered on whether the bid is enough to even warrant opening negotiations, the person said. The board is weighing whether the company could be worth more based on its intent to hit milestones in its latest turnaround plan, the source added.

The sources spoke on condition of anonymity to discuss private deliberations.

Wall Street analysts believe Stripe and Advent can afford to pay more, and will. They have assembled US$17 billion in equity, Reuters has reported, and have raised US$50 billion in bank financing, potentially giving them the capacity to raise their offer.

The bidders’ decisions on price could be informed in part by what PayPal says this month when it reports quarterly earnings, with a weak report likely to increase pressure on PayPal and a strong one potentially encouraging a higher offer.

Competing bids for PayPal appear unlikely, however. Analysts at Morgan Stanley said this past week that Stripe and Advent International’s proposal would provide the “most credible path to value realization” for PayPal, which they said faces intense wallet competition and a maturing customer base.

(Reporting by Hannah Lang, Milana Vinn in New York, Manya Saini in Bengaluru; Editing by Colin Barr, Michelle Price, Nick Zieminski and Edmund Klamann)