PayPal Stock Takes Off Following Report Of Elliott's Stake Build: What Investors Need to Know

PayPal Holdings, Inc. PYPL, which has seen its fundamentals deteriorate, could be caught in the vortex of shareholder activism.

What Happened: Paul Singer’s Elliott Management Corp. has taken a stake in PayPal, although the size of the stake and the intention are not apparent yet, the Wall Street Journal reported, citing people familiar with the matter.

Shares of PayPal peaked at $310.16 a year ago and have lost about one-fourth of their value since then. The stock was deemed a COVID-19 play and made strong gains in 2020 and until the first half of 2021, as online shoppers took to its payment processing solutions.

As the pandemic waned and people returned to stores, PayPal began seeing a slowdown in its business. This forced the company to lower its 2022 guidance in April to below the then-consensus.

Related Link: Morgan Stanley Rates PayPal, Says Its Growth Dependent On E-Commerce Growth Normalization

Why It’s Important: Elliott, founded in 1977, is based out of New York City and its assets under management stood at $51.5 billion at the end of 2021. The fund manager is known for buying stakes into companies, specifically the struggling ones, and then taking the fight to the board room to implement changes in the company and its operations.

As recently as this month, the Journal reported that the firm built a 9% stake in social-media company Pinterest, Inc. PINS, which led to a brief rally in the shares.

PayPal was spun off from e-commerce company eBay, Inc. EBAY.

Price Action: PayPal shares closed Tuesday’s session down 5.65% to $77.04 but rose 7.48% in after-hours trading, according to data from Benzinga Pro.