PayPal's Message to Shareholders: 'Trust Us'
PayPal has a message for Wall Street and would-be buyers: “We got this.” That’s the upshot of CEO Enrique Lores’ response to what he called “recent M&A speculation”—also known as Stripe’s reported $53 billion takeover bid for the struggling payments firm. Lores wouldn’t comment about anything specific, but his comments implied Stripe’s offer didn’t meet PayPal’s bar, and the board was sticking with its existing plan for managing the business.
Lores said the right things, to be sure. The board is “open” to offers and would compare any with its own plan and choose “the option that creates more value.” His plan, which he said “will create significant value for our shareholders,” involves things like speeding up Venmo’s growth and expanding its payment services business (which includes Braintree) and getting affluent consumers to use PayPal more. When Lores was asked why these efforts would succeed where PayPal’s previous turnaround measures hadn’t, he repeated what he’d said a few moments before and added that he was “improving execution, improving accountability.” In other words, he would run the company better than in the past. It’s not exactly a persuasive answer.
The Stripe offer, reportedly made with private equity firm Advent, was too low—there’s no doubt about that. It’s possible it has elements that made it unappealing, such as a lack of secured financing. Perhaps the board is negotiating with Stripe and Advent behind the scenes to lift the offer. The board might be quietly exploring other options. But it’s common in these situations for a board to publicly open an auction up to all comers as a way of seeing what someone might pay. PayPal hasn’t done that. It’s leaving shareholders to trust that the board knows what it’s doing.
That’s asking a lot. After all, PayPal has been a dumpster fire in recent years, with its stock falling roughly 80% since 2021 as growth has slowed to a crawl and rivals like Apple Pay have dug in. Lores, a former CEO of HP, has only been in the job since March. He has no prior experience running a payments firm.
It may be relevant that no one on the board has a significant stake in the company. As of earlier this year, the entire board’s combined stake was 5.66 million shares, or 0.6% of the shares outstanding. Would PayPal’s board take a different stance if directors had a bit more skin in the game? Just asking.