WSJ News Exclusive | Activist Elliott Management Holds Stake in PayPal

PayPal is a sizable target, with a market value of roughly $89 billion even after a significant downdraft in its shares. (At its peak about a year ago, the company was worth more than $350 billion.) The shares have lost around 60% so far this year, as e-commerce sales for which the company facilitates payments slowed amid the end of pandemic lockdowns.

PayPal shares in February suffered their worst one-day selloff on record after the company lowered its 2022 profit outlook and scrapped an ambitious growth strategy put in place last year of roughly doubling its active user base to 750 million accounts. Chief Executive

Dan Schulman

said the focus was on getting frequent PayPal users to utilize the company’s core services, such as online checkout and digital wallets, more often—and not on pursuing customers who are unlikely to transact regularly.

For much of 2020 and 2021, PayPal was an investor favorite. The migration to online shopping over the course of the Covid-19 pandemic boosted its transaction volumes and profit, sending its market capitalization higher than almost every U.S. bank. But sentiment started to sour as shoppers returned to stores after the height of the pandemic passed.

In April, PayPal reported first-quarter earnings that included better-than-expected revenue but a decline in profit. The company said it added 2.4 million net new active accounts, bringing its total to 429 million.

In October, news of a potential deal to buy social-media company

Pinterest Inc.

PINS 8.81%

for $40 billion-plus sent PayPal shares even lower, prompting it to abandon the idea.

Elliott, with more than $50 billion under management as of the end of last year, is known as one of the most prolific activists, running campaigns at companies including

AT&T Inc.

and

Twitter Inc.

The Wall Street Journal reported this month that Elliott has a sizable stake in Pinterest. It isn’t clear what Elliott’s thesis is in the case of Pinterest.

PayPal has been in an activist’s sights before. In 2014,

Carl Icahn

took a stake in

eBay Inc.

EBAY 1.73%

and pushed for the company to spin off PayPal, which he expected would be more highly valued as a payments company separate from the namesake shopping platform. The company spun off PayPal the following year.

PayPal is set to report its second-quarter earnings next Tuesday.