Affirm jumps 10% as Stripe abandons $50B PayPal bid

Affirm, Klarna and Sezzle rallied Friday after Stripe and Advent International walked away from a $50 billion-plus takeover of PayPal.

Affirm shares jumped 10 percent Friday morning as the collapse of Stripe and Advent International's $50 billion-plus pursuit of PayPal removed a looming competitive threat to buy now, pay later providers.

The consortium had offered $60.50 per share in July, valuing PayPal at more than $53 billion and representing a 28 percent premium to the stock's price before the approach became public. PayPal's board rejected the offer as inadequate, holding out for closer to $70 per share, and talks collapsed in mid-August when the buyers declined to raise their bid. The deal would have ranked among the largest leveraged buyouts on record, backed by roughly $50 billion in committed bank financing.

Klarna gained 6 percent and Sezzle rose 2 percent, broadening the relief trade across the BNPL sector. PayPal itself fell as much as 16 percent in premarket trading, erasing gains built up since takeover speculation first surfaced. The stock had climbed more than 40 percent this quarter on the acquisition talk and better-than-expected second-quarter results.

The failed deal leaves PayPal chief executive Enrique Lores, who took the helm in March, to prove that a standalone turnaround can deliver more value than the rejected bid. Lores has reorganized the business into three units covering checkout, consumer financial services and Venmo, and payments and crypto, while targeting $1.5 billion in cost savings through 2027.

The deal's collapse removes a scenario BNPL competitors had feared: a combined PayPal-Stripe entity with dominant checkout infrastructure and Venmo's consumer network. Stripe, valued at $159 billion in a February employee share sale and processing around $1.9 trillion in payments last year, had been seen as the most likely consolidator in the sector. Block, the payments company formerly known as Square, was involved in early discussions but left before the formal offer was tabled.

PayPal's second-quarter results showed the scale of the turnaround challenge. Revenue rose 5 percent to $8.7 billion, while earnings per share fell 3 percent to $1.25. Monthly active users grew just 1 percent to 228 million, and transactions per active account rose 3 percent. Analysts expect annual revenue to grow 4.6 percent to $34 billion this year, with EPS expected to reach $5.39 this year and $5.79 next year.

The bright spot is Venmo. Venmo Debit Card monthly active accounts rose over 50 percent, and Pay With Venmo transactions grew over 30 percent. Some analysts believe a Venmo spin-off could unlock value, generating cash for buybacks or acquisitions. The company's competitive position faces pressure from Apple Pay and Google Pay, which have eroded PayPal's dominance in digital wallets.

Can Lores Deliver the Turnaround?

Lores has pledged to cut organizational layers and target $1.5 billion in savings through 2027, while improving marketing efficiency and integrating AI into the platforms. The company also announced plans to cut roughly 20 percent of its workforce as part of restructuring.

PayPal's market capitalization has fallen from a peak of roughly $360 billion in 2021 to approximately $52.6 billion. The stock trades at a fraction of its former valuation, with EPS expected to grow to $5.39 this year and $5.79 next year.

Traders on Polymarket have all but abandoned bets that Stripe will buy any part of PayPal this year, with the contract pricing a 10 percent implied probability, down from a peak of around 70 percent during the summer. A separate market on a full takeover now prices the chance at just 6 percent.

For investors, the failed deal means the BNPL sector faces less competitive pressure from a potential PayPal-Stripe combination, but PayPal's own turnaround remains the key question. The stock's technical setup shows a rising wedge pattern with bearish RSI and MACD divergence, with the next support level at $40.45. A future approach by Advent and Stripe remains possible should conditions shift, according to Bloomberg.

This article is for informational purposes only and does not constitute investment advice.