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Why PayPal Stock Just Went to the Moon
Key Points
Private companies Stripe and Advent may bid $53 billion to acquire PayPal.
Block may also participate in the acquisition.
The buyout offer values PayPal stock at a cheap 11.3 times earnings.
PayPal Holdings (NASDAQ: PYPL) stock exploded 17.1% higher through 10:35 a.m. ET Wednesday on reports the e-payments company has received a buyout offer from privately held companies Stripe and Advent, perhaps with assistance from publicly traded Block (NYSE: XYZ).
The reported buyout price: $53 billion.
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Image source: PayPal.
PayPal: Buy it now?
As CNBC reports this morning, Stripe, Advent, and Block have offered to acquire PayPal for $60.50 per share, nearly 28% above PayPal's closing price last night. $17 billion of the total $53 billion purchase price would be paid in stock, and the rest in cash.
Not all the details of the transaction are clear, and none of the companies reportedly involved are commenting on the reported acquisition, which Reuters first reported. Regardless, with PayPal stock down 35% over the past year (even after today's jump) versus a 20% gain for the broader S&P 500, PayPal shareholders are finally seeing a light at the end of the tunnel and hoping a buyout from Stripe and Advent may save them.
What's next for PayPal?
But is this light the tunnel exit, or an oncoming train?
According to the CNBC report, PayPal has received the offer and plans to discuss it at a board meeting on July 20, so the answer should come soon. The good news is that with PayPal stock trading at less than 9x earnings at present -- and only about 11.3x earnings at the reported purchase price -- the stock looks cheap, and there's good reason to believe Stripe, Advent, and Block would be interested in snapping up PayPal on the cheap.
The bad news is that if PayPal's board thinks it's too cheap, it might refuse to sell -- and if that happens, PayPal's stock price could go right back to where it was yesterday. Caveat investor.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Block and PayPal. The Motley Fool recommends the following options: short September 2026 $47.50 calls on PayPal. The Motley Fool has a disclosure policy.