The company that once put a bank branch in everyone's pocket just got a takeover offer from a firm that didn't exist when PayPal went public.
On Tuesday, Stripe and the private equity firm Advent International made a joint offer to buy PayPal for $60.50 a share, valuing it at more than $53 billion.
The bid is backed by around $50 billion in committed financing from banks… and the two buyers want to split down the middle, rather than break it up.
PayPal hasn't responded yet but shares, which had been sitting around $47, jumped more than 13% after hours.
And this is a true full fircle moment… because you have to remember what PayPal was.
It was the original fintech… the disruptor… the company Elon Musk and Peter Thiel built that let ordinary people send money over the internet back when the banks couldn't and wouldn't.
It was the future arriving early.
I remember using PayPal back in the early 2000s… because back then if you bought something online, there was nothing else that worked.
Stripe didn't exist then… in fact the founders were still teenagers back in rural Ireland.
The company was born in 2010, more than a decade after PayPal took the financial world by storm.
Now look at where the two of them sit.
Stripe was valued at $159 billion earlier this year, up more than 70% on its valuation a year before.
PayPal… which was valued at more than $270 billion at it’s peak… is 80% down from there sitting at around $50 billion.
Even on a micro level… here at Freeman Publications… Stripe accounts for around 70% of our transactions… with PayPal at less than 20%
So how does the disrupter end up as the disrupted?
Slowly, and then all at once.
The board pushed out its previous CEO because the "pace of change and execution was not in line with expectations,"
Translation: We’re being lapped by our competitors
PayPal then brought in a new CEO from HP, Enrique Lores, who told shareholders in May that the plan was to remove duplicate management layers and adopt AI faster, for at least $1.5 billion in savings over two to three years.
Translation: Layoffs, they are a-coming
That ended up being about 20% of its staff. Then last month, PayPal shut down its venture capital division.
None of those are the actions of a young, hungry company. They're the actions of a company that got big, got comfortable, and woke up to find the ground had moved.
Meanwhile Stripe spent those same years buying… including a stablecoin platform and a billing platform.
It kept moving while PayPal defended.
And all the while PayPal shareholders stubbornly held the stock believing that the good ol’ days were right around the corner.
So I’d encourage you to look at your own portfolio here… because I’m comfortable that every one of us holds at least one company because of what it used to be.
The name that dominated for twenty years… the brand your parents trusted… the stock that “you can't go wrong with."
Incumbency feels like safety. A big, familiar, established company feels like the opposite of risk.
PayPal was all of those things. It was the biggest, most familiar name in its industry, built by legends, and it still lost 80% of its value to a company run by two brothers who started with a few lines of code.
Because size alone is not a moat… and sometimes size is just a slower target.
For more on what actually constitutes a moat, grab a copy of Fantastic Moats and Where to Find Them
Oliver