Insider Weekends: Dan Shulman Purchases Shares of PayPal

PayPal (PYPL) went public twenty years ago in February 2002 but its stint as a public company was short lived. Just a few months after the company’s IPO at $13 per share, eBay (EBAY) decided to acquire the company for $1.5 billion much to the delight of the PayPal Mafia, that went on to found a plethora of very successful companies including LinkedIn (Reid Hoffman), Yelp (Jeremy Stoppelman and Russell Simmons), Palantir (Peter Theil) and Affirm (Max Levchin) just to name a few.

eBay spun out PayPal as an independent company in July 2015 a few months after its current President and CEO Dan Shulman joined the company after spending nearly 5 years at American Express as Group President of Enterprise Growth. Last summer, eBay severed its ties with PayPal, and the loss of this relationship put a damper on PayPal with revenue growth slowing to 13.11% in Q4 2021 and the company issued weak Q1 2022 guidance of 6% revenue growth. A combination of a broader market shift away from growth stocks and company specific events hit the stock hard. The stock, which had been on a tear in recent years and was at one point up more than 650% since the spinoff from eBay, dropped nearly 60% during the last year as you can see from the chart below.

Despite the loss of the eBay business, Q4 2021 revenue came in at $6.92 billion compared to $6.12 billion a year ago and the company reported earnings of $1.11 per share, marginally higher than $1.08 in Q4 2020. The company processed $1.25 trillion in payments in 2021 and its Venmo division accounted for nearly 20% of that payment volume. With partnerships like DoorDash, the Venmo division grew its total payment volume by 44% in 2021. GAAP EPS for 2021 was $3.52 and non-GAAP EPS came in at $4.60. Despite the weak 6% revenue growth guidance for the first quarter of 2022, the company expects to grow its revenue by 17% for the full year. Analysts estimate 2022 EPS to come in at $4.67, giving the company a forward P/E of 25.

Insiders of PayPal appear to be more optimistic about the company than investors or analysts and we saw a cluster of three insiders including the CEO purchase shares last week as outlined below. This was the first purchase by Dan Shulman since its spinoff from eBay and he was selling shares until December 2021. The interesting thing about his purchase is not just the size of his purchase relative to his net worth or the size of his prior sales but that he will have to give back any profits to the company on account of the section 16(b) short-swing rule.

The short-swing rule for insider transactions states that if a purchase and a sale occur within a six month period, the insider has to disgorge any profits back to the company. As I tweeted last week, Paypal and Dan Shulman are aware of this and explicitly call this out in the footnote of the form 4 filing. I am perplexed by his decision to buy stock despite this rule and I can only interpret it as an attempt to signal the market that he thinks the stock is undervalued.

We have been writing a new series about growth stocks that have fallen out of favor and will be writing in more detail about PayPal in the coming weeks. We published our second installment in the series called Broken Growth Stocks: Twitter last week.

Welcome to edition 606 of Insider Weekends. Insider buying increased last week with insiders purchasing $228.41 million of stock compared to $176.12 million in the week prior. Selling also increased to $1.63 billion compared to $917.47 million in the week prior.

Sell/Buy Ratio: The insider Sell/Buy ratio is calculated by dividing the total insider sales in a given week by total insider purchases that week. The adjusted ratio for last week went up to 7.14. In other words, insiders sold more than 7 times as much stock as they purchased. The Sell/Buy ratio this week was unfavorable compared to the prior week when the ratio stood at 5.21.

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Notable Insider Buys:

1. Asana, Inc. (ASAN): $61.56

President, CEO, & Chair Dustin A. Moskovitz acquired 1,250,000 shares of this work management platform, paying $63.20 per share for a total amount of $79.01 million. Mr. Moskovitz increased his stake by 7.53% to 17,839,676 shares with this purchase.

You can view the list of recent insider transactions for Asana, Inc. here.

2. PennyMac Financial Services, Inc. (PFSI): $61.09

Director Farhad Nanji acquired 460,292 shares of this mortgage origination and services company, paying $60.17 per share for a total amount of $27.69 million.

You can view the list of recent insider transactions for PennyMac Financial Services, Inc. here.

3. loanDepot, Inc. (LDI): $4.14

Shares of this mortgage origination and services company were acquired by 2 insiders:

• Chief Executive Officer Anthony Li Hsieh acquired 1,678,124 shares, paying $3.69 per share for a total amount of $6,187,186.
• Director Pamela H. Patenaude acquired 6,053 shares, paying $3.79 per share for a total amount of $22,959. Mr. Patenaude increased his stake by 105.73% to 11,778 shares with this purchase.

You can view the list of recent insider transactions for loanDepot, Inc. here.

4. PayPal Holdings, Inc. (PYPL): $115.29

Shares of PayPal were acquired by 3 insiders:

• Director David W. Dorman acquired 8,400 shares, paying $119.33 per share for a total amount of $1 million. Mr. Dorman increased his stake by 18.47% to 53,880 shares with this purchase.
• President and CEO Daniel H. Schulman acquired 7,994 shares, paying $124.57 per share for a total amount of $995,842. Mr. Schulman increased his stake by 4.24% to 196,544 shares with this purchase.
• Director Frank D. Yeary acquired 4,000 shares, paying $124.85 per share for a total amount of $499,400. These shares were purchased indirectly through a trust.

You can view the list of recent insider transactions for PayPal Holdings, Inc. here.

5. Leslie’s, Inc. (LESL): $20.63

Shares of this pool and spa products company were acquired by 2 insiders:

• Chief Executive Officer Michael R. Egeck acquired 101,700 shares, paying $19.66 per share for a total amount of $1.99 million. Mr. Egeck increased his stake by 5.31% to 2,015,931 shares with this purchase.
• Executive Vice President, Chief Financial Officer and Treasurer Steven M. Weddell acquired 25,000 shares, paying $19.80 per share for a total amount of $495,000. Mr. Weddell increased his stake by 1.80% to 1,411,377 shares with this purchase.

You can view the list of recent insider transactions for Leslie’s, Inc. here.

You can view the full list of purchases from this Insider Buying page.

Notable Insider Sales:

1. Alphabet Inc. (GOOG): $2682.6

Shares of Alphabet were sold by 5 insiders:

• Director Sergey Brin sold 83,334 shares for $2864.09, generating $238.68 million from the sale.
• Director Lawrence Page sold 55,556 shares for $2839.35, generating $157.74 million from the sale.
• Director Kavitark Ram Shriram sold 5,000 shares for $2780.00, generating $13.9 million from the sale. 2,500 of these shares were sold indirectly by Mr. Shriram’s spouse.
• Director John L. Hennessy sold 150 shares for $2820.89, generating $423,133 from the sale. These shares were sold indirectly through a trust.
• Director Frances Arnold sold 50 shares for $2858.00, generating $142,900 from the sale.

You can view the list of recent insider transactions for Alphabet Inc. here.

2. Snap Inc. (SNAP): $39.49

Shares of this social media company were sold by 2 insiders:

• Chief Technology Officer Robert C. Murphy sold 950,000 shares for $38.15, generating $36.25 million from the sale.
• Chief Business Officer Jeremi Gorman sold 10,285 shares for $40.00, generating $411,400 from the sale.

You can view the list of recent insider transactions for Snap Inc. here.

3. Ares Management Corporation (ARES): $79.9

Co-Founder, CEO and President Michael J. Arougheti sold 364,590 shares of this asset management company for $81.02, generating $29.54 million from the sale. These shares were sold indirectly by Atticus Enterprises LLC.

You can view the list of recent insider transactions for Ares Management Corporation here.

4. The Charles Schwab Corporation (SCHW): $89.11

Shares of Charles Schwab were sold by 4 insiders:

• Chairman Charles R. Schwab sold 150,153 shares for $93.19, generating $13.99 million from the sale. These shares were sold indirectly through a trust.
• President Richard A. Wurster sold 61,423 shares for $94.62, generating $5.81 million from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
• MD, EVP, and CFO Peter B. Crawford sold 7,500 shares for $93.11, generating $698,331 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.
• MD, EVP, and General Counsel Peter J. Morgan sold 4,480 shares for $94.04, generating $421,319 from the sale. These shares were sold as a result of exercising options immediately prior to the sale.

You can view the list of recent insider transactions for The Charles Schwab Corporation here.

5. Morningstar, Inc. (MORN): $285.63

Executive Chairman Joseph D. Mansueto sold 49,348 shares of this independent investment research services provider for $295.19, generating $14.57 million from the sale.

You can view the list of recent insider transactions for Morningstar, Inc. here.

You can view the full list of sales from this Insider Sales page.

The list of all insider purchases and sales by management people is only available to InsideArbitrage Premium and Plus members.

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