Stripe and Advent may increase offer for PayPal

Payment processor Stripe and Advent may increase their bid for PayPal, after an initial proposal of $60.50 per share was deemed insufficient, according to the Wall Street Journal. The parties may reach an agreement in the coming weeks, but there are no guarantees that the transaction will be completed. The initial offer, made in July, valued PayPal at around $53 billion.

The amount was considered low by the company's board, which believes the price does not capture the potential for recovery of the company under the new CEO, Enrique Lores. Since taking over in March, Lores has been implementing cost cuts, reorganizing the business, and betting on artificial intelligence. At the same time, two important PayPal operations - Venmo, a kind of "American Pix", and Braintree, a payment platform for companies and marketplaces - continue to grow.

For Morgan Stanley, however, PayPal has limited options to unlock value. The bank said that competition in the sector, technological lag, and other challenges make it difficult to sustain a growth acceleration. In this scenario, the bank considers that a sale would offer "an attractive exit" to shareholders of a company whose strategic flexibility has decreased.

This assessment, however, is far from being a consensus. Morningstar calculates PayPal's fair value at $80 per share, 32% above the initial offer. For analyst Brett Horn, the proposal reinforces the thesis that the market has been excessively pessimistic about the company. For Stripe, the deal would also have a strategic gain: the company, valued at $159 billion, would combine its strong presence among merchants with PayPal's huge consumer base - around 430 million accounts - and assets like Venmo, creating one of the largest online payment platforms in the world.

Now, the question is how much Stripe and Advent are willing to pay to capture this value - and how much PayPal is willing to give up its recovery plan in exchange for an immediate exit.