Musings on a Potential PayPal Takeover

First came the Bloomberg article on Monday: PayPal is attracting takeover interest with ‘at least one large rival looking at the whole company’ while others are ‘only interested in certain PayPal assets.’ Then the follow-up from Bloomberg on Tuesday naming names: ‘Stripe is considering an acquisition of all or parts of PayPal.’ It was emphasized in both articles that these are preliminary discussions, and talks have not advanced to more serious stages. Still, it’s thrown a lifeline to PayPal shareholders. PayPal’s stock is up 13% the last two days. Even so, shares are still down 19.5% year-to-date. I think there are a couple plausible reasons why stories like these get written:

• First, there’s genuine interest by Stripe and others in PayPal’s assets, especially at the price the overall business is trading at. According to the articles, the interest is unsolicited. With the upcoming change in leadership (Enrique Lores begins as CEO March 1), suitors may be gauging receptivity by incoming management to asset sales or an acquisition of the entire company. That interest may have always been there but not verbalized at higher prices or quietly rebuffed by past management teams.

• The second possibility is that incoming leadership is broadcasting nibbles to see if they get bigger bites. Certainly, if companies see Stripe’s interest, they may feel compelled to throw their hat in the ring with better and more serious offers.

For the purpose of the following exercise, I am going to assume there is genuine interest. As I wrote back in December (PayPal: Past, Present and Future), PayPal has at least 16 different volume streams, all with unique growth and margin profiles. Below is a description of the most important ones, KPIs for each, and what companies may be interested and able to buy them, and why:

Branded Online Checkout: Includes PayPal and eBay Pay Now volume. PayPal’s largest volume stream (~$470B in 2025), among the most profitable, but growing the slowest (up 2% in 2025, likely down low-single-digits in 2026). Execution issues are slowing adoption of modern checkout experiences, causing PayPal to fall further behind Apple Pay and others. The mix of volume continues to shift toward large enterprises, and away from small and mid-sized businesses, compressing margins. The biggest draw here is PayPal’s large two-sided network, counting tens of millions of merchants and hundreds of millions of consumers. Scale is important in payments. I see no reason why it won’t be for agentic commerce. Bringing to bear the largest merchant catalog could strengthen the hand of a payment service provider (PSP) and protect their, and their merchant’s, economic interests against LLMs. Scale could attract other merchants to the platform too. According to reports, OpenAI is charging merchants 4% when a transaction is completed through ChatGPT’s Instant Checkout. Imagine a PSP provider whose scale demands a discounted rate, acting as a magnet to attract other merchants. For these reasons, I believe potential suitors could include Stripe, Shopify, Adyen, and Apple.

Braintree: Processing around $590B of volume in 2025, Braintree has fully recovered from its disastrous foray into a growth at any cost strategy a few years back. According to PayPal, in the fourth quarter, Braintree roughly doubled its processing yield by repricing contracts and beginning to charge for value-added services. At the same time, volume growth hit double-digits to exit 2025. All of this contributed to a significant improvement in profitability. That being said, Braintree is still a distant third to its primary competitors Stripe and Adyen. I believe Braintree has a wider audience of buyers, as it provides benefits from both a scale perspective (more merchants in the era of agentic commerce) and from its actual processing infrastructure, which could be quite valuable to a number of technology companies and retailers. For these reasons, I believe potential suitors could include Stripe, Adyen, Shopify, Apple, Amazon, OpenAI, Alphabet, Meta Platforms, and Walmart (if there is a dark horse candidate, they would be it).

Venmo: With over 66 million monthly active users and around $300B of P2P volume, Venmo is the largest non-bank affiliated P2P network. Still, its monetization lags far behind peer Cash App (owned by Block) whose customers are a far more natural fit for a primary banking relationship, as opposed to Venmo’s, who are more educated and affluent and likely to already bank with traditional financial institutions. In 2025, Venmo generated about $1.7 billion in revenue, excluding interest income on customer funds, which is declining due to lower interest rates. Despite significant growth in newer revenue streams like debit cards and Pay with Venmo (which collectively doubled revenue over the past two years), overall Venmo revenue grew about 20% in 2025. The likely reason is because instant transfer fees, which are still the largest component of Venmo’s revenue base, are growing at a slower rate. Although we know the revenue for Venmo, we do not know how profitable the business is. There are costs to running the P2P network, including processing and fraud costs, which are not insignificant. Further, the transition from high margin instant transfer fees (1.75%) to debit card spend, which creates lower interchange revenue (around 1.0%-1.2%, further reduced by generous rewards spending to habituate customers) is likely to make a smooth margin uplift more difficult over the near to medium-term. Venmo’s more affluent user base could be a natural fit for a more upscale business, like SoFi, American Express, or JPMorgan. Others interested in creating, or increasing, a two-sided network could also find value in Venmo’s large user base, including Stripe, Apple, and Shopify.

BNPL: With $40B of volume in 2025, PayPal is among the largest BNPL providers in the world, trailing only Klarna and Affirm. Frankly, I don’t know if there would be a way for this business to be moved separately without staying a part of PayPal’s branded online checkout. But if we assume that’s possible, potential suitors could include Affirm and credit card issuers like JPMorgan, Capital One and Citi, who may see this as an opportunity to move aggressively into BNPL to complement their revolving credit card businesses.

Reasons why a deal doesn’t get done

Buying legacy assets in payments is a sure-fire way to earn a scarlet letter, and PayPal’s largest volume stream (Pay Now in branded online checkout) may be the most vulnerable in payments. Legacy assets add complexity and slow growth, offsetting any benefits from financial engineering (cost savings) that may accrue over the short-term. Stripe and Shopify (and up until a while ago, Adyen) benefit from their reputations as companies with organically built, modern platforms. Acquisitions rarely happen for them. Adding PayPal, or parts of PayPal, to the mix would likely harm their reputation, resulting in compressed multiples. Further, Stripe, Shopify, Adyen, and Apple have all performed exceedingly well against PayPal, methodically taking customers and volume from them over the years. Is there a reason to change that approach now just because PayPal’s stock price reflects their competitively challenged position? There are also obstacles for Stripe to complete such a large deal as a private company. While many deals get done in payments, many do not because of price. Multiples are at historically low levels across the industry. The spread between bid and ask may simply be too high when (and if) the time comes. Although there’s temptation to deliver immediate shareholder value by PayPal’s new management, there may be wisdom in attempting to turn the businesses around and wait for an improved backdrop before selling parts or the whole business. Finally, there’s an abundance of attractively priced pieces across payments, many in better shape than PayPal. Want a P2P app or fintech bank: how about Cash App or Chime? Looking for a BNPL provider? check out Klarna. Processing infrastructure? Global Payments and Shift4 would like a word.

Reasons why a deal does get done

Significant parts of PayPal’s business are in terminal decline, management and the board recognizes that, and the best course of action is to sell parts or the whole thing before it gets worse. There are many well capitalized suitors out there that would benefit more from owning pieces of PayPal, than PayPal itself. Uncertainty about agentic commerce and stablecoins may cause companies to act more aggressively in order to strengthen their position or shore up their perceived vulnerabilities. Valuation is dislocated for PayPal. The company has better assets than the market gives them credit for, and they can generate more meaningful premiums than currently envisioned. At the end of the day, a deal at any reasonable premium to PayPal’s current share price would result in significant earnings accretion, which may be too hard to ignore. Maybe Stripe feels the strategic benefits and boost in profitability (so close to an IPO?) is enough to pull the trigger.

Who benefits from what?

I think there a couple interesting angles to explore here. More playing the role of devil’s advocate than anything else. If a deal (or deals) gets done, and its either Stripe, Shopify, Adyen, or a large technology company as the buyer, the read-through for other payments companies could be either:

• Negative. The rich get richer. The competitive environment becomes that much more challenging. The negative sentiment grows, and disruption fears balloon, or

• Positive. The market recognizes the value of payment assets and infrastructure. There are many well capitalized suitors. This is the first domino to fall. Other companies get scooped at a premium to PayPal.

If no deal (or deals) gets done, the read-through for other payments companies could be either:

• Negative. Multiples may need to fall further across the industry to attract buyers. Interest was not real. The status quo holds, and organically built modern platform companies will win without legacy assets, or

• Positive. There’s an underlying bid for the group. Even though PayPal did not come to terms, better companies across payments now have a floor.

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Disclosure: Of the companies mentioned in this report, as of February 25, 2026, I am long Adyen, Block, Global Payments, and Shift4 Payments. This report is for informational purposes only and is not a recommendation to buy or sell any stock. Finally, while I rely on the information in this report to guide my investment decisions, you should not, because I cannot guarantee its accuracy.