PayPal keeps half of the takeover premium after Stripe and Advent walk away

Start with the $6.29 still in the price. The offer put $13.13 a share of premium into PayPal, being $60.50 against the $47.37 close before the bid was reported ^[2][6][1], and Friday's $53.66 gave back $6.84 of that, which leaves just under half the dead deal's premium sitting there ^[4][2]. Thursday is the more interesting number: at $61.47 the stock traded 97 cents above the bid ^[5][4], so the marginal buyer was not paying for the offer on the table but for the higher one the Wall Street Journal reported was being negotiated ^[27].

What that buyer now owns is a cost programme. Enrique Lores, in the chair since March, has cut the company into three units and about 20 per cent of the staff to reach $1.5 billion of savings ^[15][14]. Against second-quarter net income annualised at $4.88 billion, $1.5 billion is 31 per cent ^[7], and on the roughly 876 million shares implied by a $53 billion price at $60.50 it is $1.71 a share a year pre-tax ^[11]; capitalise that at ten times and the restructuring is worth about $17 a share, more than the premium the market just handed back ^[12]. That is the bull case and it deserves stating first.

The trouble is what the savings are answering. Volume grew 10 per cent to $486.4 billion in the quarter while revenue grew 5 per cent ^[12][13], which puts the take rate at about 1.79 per cent against 1.87 per cent a year earlier, a shade under nine basis points given away ^[5]. Nine basis points on $486.4 billion of quarterly volume is $434 million, or about $1.73 billion annualised ^[13]. So the price concession over twelve months is larger than the entire savings target, and net margin fell from 16.5 per cent to 14.0 per cent while it happened ^[6].

On the sources' own numbers the equity has done worse than the share price: down 81 per cent over five years ^[16], 82 per cent from the July 2021 peak ^[17], but from roughly $360 billion of market value in 2021 to about $52.6 billion, which is 85 per cent ^[18][8]. The periods do not line up exactly, so treat it as direction rather than decimal, but a market value falling faster than the price means the share count shrank by something like a fifth, and PayPal retired that stock at prices nobody is offering today ^[8].

Two readings survive. Bloomberg's people say the situation is fluid and the pair could come back ^[19], and Lores told investors he would carefully consider any path that created superior value for shareholders ^[21], which is not the language of a board that wants to be left alone. Michael Burry's range, $75 to $115 with a winning bid near $100, is 65 per cent above the offer that just died ^[20][9], and if he is right the floor was never at $60.50 in the first place. The duller reading, which this desk leans toward, is that a consortium which walked while the board declined to send a formal reply ^[7] is not the party that returns 65 per cent higher, particularly with William Blair's Andrew Jeffrey writing that the tech stack lags disruptive competitors ^[25]. (Block looked at this in April and exited before any formal bid was made ^[8].)

What would prove that wrong is one line in the next print: revenue growth converging on volume growth. If the take rate steadies near 1.79 per cent, the $1.5 billion lands on a stable base and the $17 a share is real money. If it keeps sliding nine basis points a year, the savings are the fee for standing still.