Shares Of PayPal Jump On Sale Of KKR’s ‘Buy Now, Pay Later’ Loan For $43.7 Billion

(CTN News) – KKR (KKR) – Get Free Report PayPal shares jumped on Monday after the company agreed to sell around €40 billion in buy now, pay later loans originated in Europe.

PayPal anticipates that the sale of loan books, valued at approximately $43.7 billion, will generate around $1.8 billion in gross proceeds in the second half of the year.

An estimated $1 billion of the proceeds will be used to buy back PayPal shares.

With the agreement, will continue to offer buy now, pay later loans that are designed to attract new customers to its key payment-services division without affecting its balance sheet.

While PayPal has pledged to take out millions in costs, including a 7% reduction of its workforce, since the beginning of this year, there are concerns about thinning profit margins.

‘Buy Now, Pay Later’ is a key PayPal feature

This agreement will enable to continue offering buy now, pay later loans to attract new users to its key payment-services division without weighing down its balance sheet.

While PayPal has pledged to take out millions in costs, including a 7% reduction of its workforce, since the beginning of this year, there are concerns about thinning profit margins.

“Buy now, pay later has become a major asset to checkout experience, driving engagement, payment volume growth, and repeat purchases for our merchants,” said PayPal’s acting chief financial officer, Gabrielle Rabinovitch.

As a result of our cooperation with KKR, we are able to accelerate our Pay Later originations in Europe in support of market demand, while preserving free cash flow for other strategic initiatives. As yet another example of our disciplined approach to capital allocation, we are pleased to announce this transaction.

As a result of the KKR deal, PayPal shares rose 1.9% in early Tuesday trading, compared with a 0.2% decline for the Nasdaq, to change hands at $67.70 each.

In its earnings report for the three months ended in March, PayPal reported a 44% rise in adjusted earnings to $1.17 per share, exceeding Wall Street’s expectations.

The company’s revenues increased by 8.6% to $7.04 billion, while its payments volumes increased by 12% to $354.5 billion.

It is expected that earnings for the June quarter will range between $1.15 and $1.17 per share, just shy of Refinitiv estimates, suggesting that the cost reductions will have a limited impact on profit margins in the second half of the year, as Rabinovitch described them as “modest.”

Daniel Schulman, PayPal’s long-time CEO, announced earlier this year that he would step down at the end of 2023 to devote more time to his passions outside the workplace. Schulman will, however, continue to serve on PayPal’s board of directors.

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