Hedge fund Elliott Management has reportedly taken a stake in e-commerce firm PayPal Holdings. PYPL stock popped Wednesday on the news as one analyst speculated a merger with Pinterest could be in the works.
Elliott Management might be a large shareholder in PayPal, according to a Wall Street Journal report late Tuesday.
At CFRA Research, analyst David Holt said Elliott, an activist investor, may push for a merger with social media firm Pinterest. PayPal called off merger talks with Pinterest in 2021.
Pinterest recently hired former PayPal executive Bill Ready as its chief executive. Most recently Ready was a senior executive at Alphabet.
Pinterest Has New CEO
"We suspect (Elliott Management's) interest in PYPL could be to rekindle the potential for a tie-up with Pinterest after (PayPal) scrapped plans in October 2021," Holt said. "As a reminder, Elliott also acquired a 9% stake in PINS earlier in July 2022 and (Pinterest) appointed Bill Ready as CEO, who served as chief operating officer of PayPal from 2013 to 2019."
Holt added: "Mr. Ready's extensive background in one of its highest growing areas at PayPal (Braintree) could come in handy as the company tries to protect share in its core checkout business. Similarly, we note the financial positioning of both companies remains attractive for strategic activities, with clean balance sheets and cost structures ready to be right-sized."
PayPal stock jumped 12.2% to close at 86.42 on the stock market today. Pinterest made a similar jump, surging 11.3% to close at 19.20.
Pinterest reports earnings on Aug. 1. Earnings for PayPal stock are due Aug. 2.
San Jose, Calif.-based PayPal in February abandoned five-year financial targets. In May, PayPal lowered 2022 guidance on per-share earnings, revenue and total payment volume.
PayPal Stock Plummets In 2022
For 2022, PayPal forecasts revenue growth in a range of 11% to 13% vs. earlier predictions of 15% to 17% growth.
PYPL stock had retreated 59% in 2022 as of Tuesday's market close. PayPal still has a market valuation over $89 billion.
Former parent eBay, which spun off PayPal in 2015, has shifted its payment processing from PayPal to Netherlands-based Adyen.
PayPal stock holds a Relative Strength Rating of only 4 out of a best-possible 99, according to IBD Stock Checkup.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
