PayPal Plunges 17% Pre-Market as Advent and Stripe Abandon Over $50 Billion Acquisition

TradingKey - On August 28, PayPal (PYPL) shares plummeted by approximately 17% in pre-market trading following reports that a consortium formed by Advent International and payment giant Stripe had abandoned its acquisition of PayPal.

Source: TradingView

Previously, the consortium had proposed an acquisition offer exceeding $50 billion, with market reports indicating a bid of approximately $53 billion. Had the deal been finalized, it could have been one of the largest leveraged buyout transactions in history.

According to Bloomberg, people familiar with the matter revealed that Advent and Stripe have withdrawn from acquisition talks after the two sides failed to reach an agreement on price. PayPal's board was previously reported to be dissatisfied with the initial offer, seeking a higher acquisition price.

The news also quickly cooled market expectations regarding an acquisition of PayPal. In February this year, reports first surfaced that Stripe was evaluating the possibility of acquiring part or all of PayPal's business.

At the time, PayPal's stock price was under sustained pressure and its valuation had shrunk significantly. However, as acquisition rumors heated up, coupled with better-than-expected second-quarter earnings, the company's stock subsequently rebounded sharply, with cumulative gains exceeding 40% at one point this quarter and its market capitalization recovering to about $52.6 billion.

The collapse of the acquisition comes as PayPal is undergoing a strategic adjustment phase. Earlier this year, the company replaced its chief executive officer, with Enrique Lores taking over, and set out to reset its financial targets while further breaking down the operational performance of each business line to provide investors with a clearer assessment of the company's growth potential.

However, the temporary termination of acquisition talks does not mean a deal is entirely off the table. Should the two sides narrow their differences on valuation or deal terms in the future, Advent and Stripe may not rule out submitting a new offer.