Partnerships / Acquisitions

Third Point Takes New Position In PayPal

Third Point, the hedge fund run by Daniel Loeb, has taken a new position in PayPal. According to a report in CNBC, citing a Third Point investor letter, the position was added in the second quarter of this year.

“Consumers love PayPal because it enables hassle‐free, one‐touch checkout across millions of online merchants,” Loeb said in the note to clients. “We see parallels between PayPal and other best‐in‐class internet platforms like Netflix and Amazon: high and rising market share, untapped pricing power and significant margin expansion potential.”

According to CNBC, Third Point pointed to PayPal’s 237 million active accounts and 19 million merchants that use the payment solution as giving it a big edge over its customers. What’s more, the investor said PayPal is “just scratching the surface on pricing power” by shifting from a one-size-fits-all approach to contracts with merchants to a “dynamic pricing model that reflects the value‐add of a growing suite of products.”

The move on the part of Third Point comes as PayPal has been acquisitive and earmarked billions for future M&A. According to a Reuters report from earlier in July, PayPal Chief Executive Dan Schulman told Germany’s Handelsblatt business newspaper that the company has a healthy balance sheet that it will use to make buys. He said the company is ready to invest up to $3 billion a year on acquisitions that enable it to acquire specific capabilities. “I wouldn’t rule out that we take on a bigger deal if there’s a good fit for us,” added Schulman.

PayPal has already been busy with acquisitions, marking its biggest buy to date with the May purchase of Swedish payments company iZettle for $2.2 billion in cash. In June, PayPal announced it will buy payments payout platform Hyperwallet for $400 million in cash. The completion of the acquisition, expected in the fourth quarter, will result in PayPal and Braintree, a payment processor owned by PayPal, having more prowess around “localized, multi-currency payment distribution capabilities … with numerous disbursement options, including prepaid card, bank account, debit card, cash pickup, check and PayPal,” according to a company statement.

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