Report: PayPal faces billion-dollar takeover according to insiders

The background to the transaction is PayPal's massive loss of value. In the past twelve months alone, the company lost more than 40 percent of its market value. The market capitalization, which had stood at around $360 billion in 2021 during the pandemic, fell at times this year to a low of $36 billion.

Background: From pandemic star to problem child

PayPal was founded by US tech billionaire Peter Thiel, who originates from Germany, and has long been one of the best-known names in online payments. The group also includes the payment service Venmo, which has a large user base particularly in the United States.

With Advent International, one of the world's largest private equity investors is involved in the deal. Among other things, Advent holds a stake in the payment service Stripe, a direct competitor of PayPal. A takeover by Advent would thus bring two players in the industry under one roof.

The takeover plans come at a time when the entire fintech sector is under pressure. Falling valuations, rising interest rates, and intensified competition from new payment providers have put the business models of many providers under pressure.

Reactions and open questions

Should the deal go through, it would be one of the few major takeovers in the US technology sector this year. Observers expect close scrutiny by the competition authorities, particularly as PayPal is considered critical payment infrastructure in the US and Europe.

Both sides have so far not publicly commented on the reports. Neither PayPal nor Advent wished to comment on the Reuters report. The name of the second buyer was also not mentioned in the insider information available so far.

PayPal's share price reacted to the reports with a sharp jump. Investors interpreted the news as a sign that the board of directors considers the company strategically relevant despite the ongoing business problems.

Analysts see the possible takeover offer above all as an attempt to reposition the company outside the stock exchange. A delisting would give management more leeway to carry out long-term restructurings without having to justify themselves to the public every quarter.

Outlook: Possible consequences for customers and employees

For PayPal's employees and customers, little is likely to change in the short term according to industry experts. In the medium to long term, however, adjustments in the product portfolio and in the fee structures are conceivable, it was said.

The final price and the structure of the deal could still change, the insiders said. The negotiations have not yet been concluded and could still fail or lead to a competing offer.

Market participants in Europe also expect an in-depth review by the EU Commission should the deal be announced. Cross-border payment traffic is considered systemically important, which is why the competition watchdogs are likely to pay particular attention to possible effects on the European market.