2026-08-29

PayPal (PYPL) Sinks 12.7% as Stripe-Advent Abandon $53 Billion Buyout, While Affirm Jumps 8.9% on Record Quarter - Same Friday, Opposite Fintech Reactions

Written & reviewed by the TradeSmrt editorial team · 2026-08-29

In this article

What Happened
Why the Same Week Produced Opposite Reactions
What to Take Away From This
FAQ
Sources

What Happened

Two fintech companies that investors often mention in the same breath went in opposite directions this week, and the timing made the contrast impossible to miss. PayPal Holdings (Nasdaq: PYPL) closed Friday, August 28 at $53.66, down 12.71% on the day, after Bloomberg reported that a buyout consortium led by private equity firm Advent International and payments processor Stripe had abandoned its pursuit of the company. Trading volume hit roughly 35.9 million shares, more than double PayPal's three-month average. Buy-now-pay-later lender Affirm Holdings (Nasdaq: AFRM) had reported fiscal fourth-quarter results after Thursday's close, August 27, with CEO Max Levchin's team calling it the company's most profitable quarter on record. The market's verdict landed the next session: on Friday, August 28 - the same day PayPal cratered - Affirm stock jumped 8.9% to close at $84.42, its strongest single-day gain since January. Both companies compete for the same slice of consumer and merchant payments spending. Only one of them still has a deal premium to lose.

The PayPal story stretches back to mid-July, when Reuters first reported that Stripe and Advent had submitted a joint offer of $60.50 per share, valuing PayPal at more than $53 billion - a roughly 28% premium to where the stock was trading at the time. The pitch made strategic sense on paper: combining Stripe's merchant-side payments infrastructure with PayPal's massive consumer wallet network would have created a company processing an estimated $3.7 trillion in annual payment volume, backed by close to $50 billion in committed bank financing. PayPal's board met on July 20 to consider the bid and rejected it as too low, pushing for a higher number rather than issuing a flat no - a common opening move in large take-private negotiations. But the two sides never closed the gap. Over the following weeks, talks stalled on price and, according to later reporting, on financing and regulatory concerns as well. By Thursday night, Bloomberg confirmed the consortium had walked away entirely, and PayPal shares - which had rallied more than 40% this quarter partly on takeover speculation - gave a large chunk of that gain back in a single session, falling as much as 16-17% in premarket trading before settling at a 12.7% decline by the close.

Affirm's report, released after Thursday's close, told a very different story. Fiscal fourth-quarter revenue rose 33% year-over-year to $1.17 billion, ahead of the $1.11 billion analysts expected, while gross merchandise volume - the total dollar value of purchases financed through Affirm - climbed 36% to $14.1 billion, also topping estimates. Adjusted operating income reached $353 million, a 30% adjusted operating margin, and reported EPS of $4.62 blew past the roughly $0.85 consensus (a figure boosted by items beyond core lending income, but even management characterized the underlying quarter as the most profitable in company history on a purely operational basis). Affirm also raised its full-year guidance for GMV, revenue, and adjusted operating margin, and it disclosed continued expansion of its merchant partnerships, including deeper integration with Shopify's checkout flow. Wall Street responded with a wave of price-target increases - RBC Capital moved to $96, BMO to $101, and Bank of America to $104 - all citing Affirm's separation from competitors in the buy-now-pay-later space and confidence in its fiscal 2027 outlook.

Why the Same Week Produced Opposite Reactions

The mechanism behind PayPal's drop is one every merger-arbitrage investor recognizes: when a stock trades up on acquisition speculation, part of its price reflects the probability-weighted value of a deal closing at a premium, not just the standalone business. PayPal's rally this quarter was driven in meaningful part by the market pricing in some chance that a $60.50-per-share deal - or something close to it - would eventually get done. Once Stripe and Advent confirmed they were walking away, that embedded deal premium had to come out of the price in a single move, which is exactly the kind of air-pocket decline merger-arb desks call a "deal-break gap." Crucially, this was not new information about PayPal's underlying payments business, consumer engagement, or profitability - the company's fundamentals didn't change on Thursday night. What changed was the market's assessment of a specific, high-probability catalyst, and prices that are propped up by catalyst speculation tend to fall hard and fast when that catalyst disappears. Some analysts, including portfolio manager Thomas Hayes, have argued the board actually protected shareholders by refusing to sell the company cheap and preserving what he called "meaningful upside" - a framing that may prove correct over a multi-year horizon, but does nothing to cushion Friday's one-day move for anyone who bought into the deal narrative near the highs.

Affirm's rally sits on the opposite kind of foundation entirely. There is no acquisition rumor embedded in AFRM's price - the stock moved because the company's actual quarterly results, the numbers that describe how its lending and merchant-partnership business is performing right now, came in meaningfully ahead of what analysts had modeled. GMV growth of 36% and a 30% adjusted operating margin are not speculative inputs; they are realized outcomes that flow directly into how much cash the business generates. That distinction matters for how durable each move is likely to be. A gain built on an earnings beat and raised guidance reflects updated expectations about the business's actual trajectory, and while it can still reverse if a subsequent quarter disappoints, it isn't vulnerable to a single headline the way a takeover-premium rally is. PayPal's move this week is a useful reminder that trading a stock partly on deal speculation means underwriting two separate risks at once - the operating business and the binary outcome of whether a negotiation succeeds - and the second one can evaporate overnight with no warning beyond a wire report.

There's also a broader read-through for how the market is currently pricing consolidation risk across payments and fintech. Stripe, still a private company reportedly eyeing its own eventual public listing, had used the PayPal approach as one avenue to add scale and a consumer-facing wallet to its merchant network. With that path now closed, at least for now, attention shifts back to organic competition between PayPal, Affirm, Block, and other players fighting for the same checkout real estate at large retailers. Whether PayPal's board reopens talks at a higher price, looks at other strategic options, or simply lets the deal speculation fade and refocuses the market on its standalone turnaround under CEO Enrique Lores is the next thing worth watching - and it will likely take more than one quarter of earnings to rebuild the confidence this week's collapse took away.

What to Take Away From This

A stock price that's inflated by takeover speculation carries a hidden risk that isn't visible in the chart. Part of PayPal's 40%-plus quarterly gain reflected the market pricing in deal odds, not just business fundamentals - and that portion evaporated in a single session once the deal died.
Deal-break gaps are usually not a verdict on the underlying business. PayPal's payments volume, user engagement, and profitability didn't change overnight; only the market's assessment of a specific catalyst did. Conflating the two can lead to overreacting in either direction.
A price move driven by a beat-and-raise earnings report tends to rest on firmer ground than one driven by rumor or negotiation. Affirm's gain reflects realized GMV growth and margin expansion - numbers that already happened - which is a fundamentally different kind of evidence than a takeover price still being negotiated.
When two comparable companies in the same sector move in opposite directions on the same day or week, the first question worth asking is whether the catalyst is company-specific (an earnings beat, a failed deal) or sector-wide - here it was clearly company-specific, which is exactly why a diversified fintech basket wouldn't have captured either move cleanly.

FAQ

Could Stripe and Advent still come back with a new offer for PayPal?

It's possible. PayPal's board reportedly treated its July rejection as an opening move in a negotiation rather than a final no, and large strategic buyers sometimes return with a revised bid after a cooling-off period. But Bloomberg's reporting indicates the consortium has abandoned the pursuit for now, so any renewed approach would be a fresh development, not a continuation of the current talks.

Does PayPal's drop mean the stock is now undervalued?

That depends entirely on what you think PayPal is worth as a standalone business, separate from any takeover premium. The 12.7% decline mechanically removed the deal-speculation portion of the price; whether the remaining price undervalues PayPal's actual payments and Venmo business is a fundamental question the market will keep debating through upcoming earnings reports, not something this one event answers on its own.

Is Affirm's stock now expensive after an 8.9% jump and multiple price-target hikes?

Valuation is relative to growth expectations, and multiple sell-side desks raised targets into the $96-$104 range specifically because Affirm's guidance implies continued GMV and margin expansion through fiscal 2027. Whether that growth materializes as projected - rather than whether Friday's price already reflects it - is what will determine if the current levels hold up.

Sources

This article is an original synthesis and analysis based on the reporting below, not a reproduction of the original articles. Please check the source articles directly for the most current figures and details.

⚠️ This article is for informational purposes only and is not investment advice. Market conditions change constantly - always verify the latest data before making investment decisions.