PayPal stock price jumped by over 5% on Monday after a report emerged that it was attracting takeover interest. PYPL jumped to a high of $45, up slightly from the year-to-date low of $38. This article explores potential companies that may be interested in PayPal and whether it will be acquired.
PayPal Stock Rose Amid Acquisition Talk
PYPL stock price jumped after Bloomberg reported that the company had attracted takeover bids, following its stock crash and the faltering of attempts to execute a turnaround strategy.
Bloomberg noted that at least one bigger rival was interested in acquiring the whole company. Other options include breaking it up and selling parts to other companies.
While the Bloomberg report did not name any potential buyers, it is relatively easy to narrow down a list of companies that would be interested in PayPal. For one, PayPal has a market capitalization of over $40 billion, meaning that any acquirer may be prepared to pay over $50 billion.
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There are a few companies that can execute such a transaction. One of them is JPMorgan, the world’s largest bank with a market capitalization of over $802 billion. The company would use the transaction to grow its business. However, the main limit is the bad blood between Jamie Dimon and Donald Trump, who has sued the bank for $5 billion.
Other large banks capable of executing such a deal are Bank of America, Goldman Sachs, and Citigroup. It is unclear whether US regulators will allow banks to acquire PayPal.
Payment networks like Visa, Mastercard, and American Express also have the resources needed to execute the deal. A PayPal buyout would help them gain access to a company used by over 400 million users worldwide.
Private equity companies may also be interested in buying PayPal, thanks to their huge dry powder and the potential to extract value.
Amazon, a top e-commerce company, may also be interested in buying the payment company. It would use its tool to compete with its top rivals like Apple and Google.
PayPal Investors May Be Hesitant to Sell
Still, it is unclear whether PayPal investors will be willing to sell the company, as many have suffered huge losses after its stock plunged from $300 during the pandemic to the current $44.
Many investors likely believe that PayPal, with strong management, can engineer an impressive turnaround. Some options to turn the company around include selling non-core brands and using its strong balance sheet to acquire large, fast-growing companies like SoFi.
The most recent results showed that the company’s business continued to struggle in the final quarter of the year, prompting it to replace its CEO.
Its revenue rose by 4% in the fourth quarter to $8.6 billion, bringing the full-year figure to over $33 billion. Also, its free cash flow remained at $2.09 billion.
The company has a solid balance sheet with over $10 billion in cash and equivalents. It has $9.9 billion in long-term debt.
