Why Stripe Wants PayPal: The Real Goal Behind the $53 Billion Acquisition Proposal
[Series: Spin-off Edition]
The Future Power Map of Stablecoins: Which Currency Will Dominate Which Financial Sphere?
In this installment, we take up the PayPal acquisition proposal that emerged as an extension of that vision. As a spin-off from the main series, I would like to consider what Stripe is seeking beyond corporate financial infrastructure.
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According to reports, Stripe and the world-leading private equity (PE) firm Advent International have proposed a $53 billion all-cash acquisition of PayPal.
The $53 billion figure is on par with the scale of major global M&A deals in recent years.
It is a massive deal that significantly exceeds Google's acquisition of Wiz ($32 billion) and Capital One's acquisition of Discover ($35.3 billion), and approaches Broadcom's acquisition of VMware ($61 billion).
Why does Stripe want PayPal this badly?
Looking back at the business Stripe has built over more than 15 years, it can be said that this is a natural move, an extension of the strategy they have been accumulating all along.
<What Stripe has built over 15+ years>
Stripe is known as an online payments company. However, it is no longer just a payments company.
Since its founding in 2010, starting from payment APIs, Stripe has gradually added corporate financial services one by one, such as:
・Billing: Recurring billing
・Connect: Revenue distribution
・Issuing: Card issuance
・Treasury: Banking functions
・Capital: Merchant financing
Furthermore, in recent years, this momentum has accelerated even more.
・Acquisition of Bridge: Gained a foundation connecting fiat currency and stablecoins
・Acquisition of Privy: Developed a mechanism for companies to embed wallets into their own services
・Tempo: Development of a blockchain specialized for payments
And now,with many companies participating,it also stands at the center of the community-based stablecoin 'Open USD'.
Stripe has established an environment where companies can receive, manage, and send money, and even handle digital assets. To that end, they have built the necessary financial infrastructure piece by piece.It can be said that what Stripe has been aiming for was not to be a payments company, but a 'financial infrastructure company'.
<Yet, the final piece was still missing>
Even for Stripe, which has expanded its financial infrastructure this far, there was one piece left until the end. That was a 'consumer base'.
Stripe's customers are merchants. Companies around the world use Stripe to accept payments. On the other hand, PayPal (payment service) and Venmo (peer-to-peer payment app) have a massive base of individual users worldwide.
In other words,Stripe holds the 'corporate side,' and PayPal holds the 'consumer side.'
If these two were to unite, a massive financial network connecting businesses and consumers would be born. A simple sum of Stripe's approximately $1.9 trillion and PayPal's approximately $1.8 trillion in annual payment volume would result ina scale of approximately $3.7 trillion, making it one of the world's largest online payment foundations.
<It also holds great significance for Open USD>
Even more interesting is the relationship with their stablecoin strategy. Stripe is currently promoting the community-based stablecoin initiative calledOpen USD.
If they could acquire PayPal, in addition to PayPal and Venmo, collaboration with 'PYUSD,' the PayPal-branded stablecoin, would also come into view.
If the acquisition goes through, the Open USD camp will instantly gain a massive consumer base, potentially holding the power to influence the very landscape of the next generation of stablecoins.
<The acquisition price cannot be raised indefinitely>
This $53 billion acquisition proposal is an extension of the vision Stripe has been building for years. That is precisely why it is hard to imagine Stripe giving up on this deal easily. It is a crucial move that follows the strategy they have cultivated for years, and its value cannot be measured by the acquisition price alone.
On the other hand, it is not the case that they can "raise the price indefinitely."
For example, consider the financing structure supporting the acquisition. According to reports, in this proposal, JPMorgan and Morgan Stanley have prepared a loan commitment of approximately $50 billion, and the Stripe-Advent alliance has also prepared approximately $17 billion in equity.
By providing such a massive loan, JPMorgan and Morgan Stanley are not looking at Stripe merely as a borrower.
- Is the acquisition price reasonable?
- How much profit can PayPal generate in the future?
- Will there be synergies from the integration with Stripe?
- Can the debt be repaid after the acquisition?
Only after spending months analyzing these points do they issue a multi-billion dollar loan commitment. Therefore, the fact that some of the world's leading investment banks have prepared such a large amount of capital can be seen as a signal that they have judged the loaned funds to be sufficiently recoverable.
However, if the acquisition price is raised to the point where that premise collapses, there is a possibility that the loan could be withdrawn or the terms of the loan could be changed.
Also, the Debt/EBITDA ratio, a metric often used in M&A, becomes important. Simply put, EBITDA is a metric that shows "how much money a company can earn from its core business." When acquisition funds are covered by debt, "how many years of EBITDA the debt is equivalent to" is a perspective often used.
If the acquisition price is raised to around $70, there are estimates that the Debt/EBITDA ratio would exceed 7 times. Financial flexibility would decrease, and the risks if post-acquisition integration does not proceed as expected would increase.
Therefore, just because Stripe is serious does not mean they can easily raise the acquisition price.
<The true meaning of $53 billion>
In this report, the sheer size of the "$53 billion" figure is attracting attention. However, that is not the only thing that is truly important.
Stripe has spent over 15 years building financial infrastructure for businesses. And now, it is trying to acquire the final piece: a consumer base. If this vision is realized, it could have a major impact not only on online payments but also on the stablecoin market, including Open USD and PYUSD.
This report is an event that shows the competition over next-generation financial infrastructure is entering a new phase.
SoFiUSD is also one of the stablecoins aiming for growth within that environment. That is why I believe the outcome of these negotiations is news that SoFi holders cannot afford to miss.
If the PayPal acquisition is realized, it will be a major tailwind for Open USD. However, that alone will not decide the winner of the stablecoin market.
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