PayPal’s Venmo Revival Pitch Gets Cold Market Response After Stripe Talks Collapse

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PayPal shares have been under pressure since takeover talks with payments startup Stripe fell apart. Chief Executive Officer Enrique Lores has outlined a plan to keep the company independent by turning peer-to-peer payment app Venmo into a broader financial platform and reviving PayPal’s existing payments business. The market response has been lukewarm.

The Wall Street Journal reported on September 16 that Stripe and private equity firm Advent International offered in July to acquire PayPal for $60.50 a share, valuing the company at more than $53 billion. PayPal stock closed at $47.37 on July 14, before reports of the talks surfaced. It jumped 17.2% to $55.52 the next day and rose to as high as $62.30 on August 20. But the talks collapsed over differences on price, sending the shares down 12.7% to $53.66 at the close on August 28. The stock ended at $53.81 on September 15. With takeover expectations gone, PayPal must now show it can restore growth on its own.

Six months into the job, Lores has put Venmo at the center of that strategy. Venmo is widely used in the US for person-to-person transfers, but it is seen as generating less profit than its user base would suggest. Lores plans to seek a Utah banking charter and turn Venmo into a broader financial platform covering budgeting, savings, investing and payments.

Venmo already offers cryptocurrency trading, custody of PayPal’s PYUSD stablecoin, and debit and credit card services. PayPal plans to add a buy now, pay later function and launch three new products within a year.

PayPal is also trying to overhaul its slowing core payments business. Its checkout button on online shopping sites has lost ground as Apple Pay and Google Wallet have expanded. Lores plans to raise usage by improving rewards and payment convenience, while also pursuing a reorganization and sweeping cost cuts.

Competition remains fierce. Block’s Cash App and Robinhood have strengthened their banking features, while Revolut and Chime are stepping up their push into the US market. PayPal has a powerful brand and a large user base, but it has not been able to turn those strengths into faster growth and improved profitability.

“PayPal stock is trading like a melting ice cube,” Sanjay Sakhrani, an analyst at Keefe, Bruyette & Woods, said. Investors do not trust the company’s ability to execute.

Oh Se-song, Hankyung.com reporter sesung@hankyung.com