Hedge fund eyeing PayPal after stock plummets

According to the Wall Street Journal, Elliott Management, a $50B hedge fund, is considering an activist-investor takeover of PayPal. PayPal’s valuation has slid from $350B to $89B over the past year.

Why should we care?
If Elliott’s activist-investor takeover succeeds, then the hedge fund has several strategies at its disposal to correct the course at PayPal. Among them, according to Dan Dolev, analyst at Mizuho Securities, is to ditch PayPal’s crypto-related projects in favor of prioritizing its e-commerce-related technologies, namely its checkout button. Dolev said the company’s margins could improve by 10% if it focused on existing business models, rather than on R&D and sales. And Elliott may get its way; anonymous sources told Bloomberg that Elliott may gain a board seat at PayPal, both symbolizing and bolstering its activist power and reach. If Elliott’s cost-cutting measures succeed—which, it should be noted, include a push for more aggressive layoffs—then we may expect other large fintechs experiencing declines to jettison their crypto-related projects. It’s especially tempting to trim the crypto fat in the midst of the crypto sector’s winter; this could decrease institutional investment in the space in the long run, or lead to scrappier crypto providers beating out fintech giants like PayPal and Robinhood.