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Welcome to edition 54 of C-Suite Transitions, a weekly series on InsideArbitrage that tracks appointments and departures at publicly traded companies during the prior week. We highlight five appointments and departures each week by picking the largest companies from the full list of management changes.
Sudden Departures
PayPal Holdings (PYPL): $59.68
History and Acquisitions
PayPal, the first digital payment platform, was established during the dot-com bubble and has maintained a leading position in payment services for over two decades. Originally named Confinity, it rebranded as PayPal after merging with Elon Musk’s financial services company X.com.
PayPal went public via an IPO in February 2002 but was quickly acquired by eBay in October 2002, becoming the default payment choice for the majority of eBay users. On September 30th, 2014, it was announced that PayPal would be spun out of eBay and resume business once more as an independent company, thanks in part to activist investor Carl Icahn’s involvement with eBay. The company went public on July 17th, 2015 with investors in eBay receiving one share of PayPal stock for every eBay share owned.
PayPal acquired,
The Information claims that over the past few months, PayPal has reportedly been collaborating with Goldman Sachs to oversee the sale of the Xoom division. The report claims that a sale attempt could be a sign that Elliott Management, which bought a stake in PayPal in 2022, is having an impact.
Leadership Changes
PayPal leadership has changed hands many times in the past, the company was initially founded by Max Levchin, Peter Thiel, and Luke Nosek – and Peter Thiel served as the CEO until the initial eBay acquisition. When the eBay-PayPal separation was announced in September 2014, Dan Schulman joined the company as CEO and continued to lead the company when it became independent.
On August 14, 2023, PayPal Holdings announced that its Board of Directors appointed Alex Chriss as President and Chief Executive Officer, effective as of September 27, 2023. He will also be joining the board.
The 8k filling also mentioned that on August 10, 2023, Dan Schulman delivered his resignation to the company, effective September 27, 2023.
Alex Chriss
Alex Chriss’s appointment marks a crucial juncture for the digital payments behemoth as it is led by a new leader for the first time since its separation from eBay in 2015. Mr. Chriss worked at Intuit for 19 years and currently holds the position of Executive Vice President and General Manager of Intuit’s (INTU) Small Business and Self-Employed Group, which contributes over half of Intuit’s total revenue.
Mr. Chriss has led a global organization of thousands of colleagues that delivered QuickBooks and Mailchimp to millions of users. Joining in July 2004, Mr. Chriss held various roles at Intuit, including forming the Partner & Developer Platform and leading the Self-Employed Solutions team.
Chriss oversaw the Small Business group for five years, growing both consumers and revenue at CAGRs of 20% and 23%, respectively. He was the driving force behind the $12 billion acquisition of Mailchimp by Intuit in 2021.
According to CNBC, Chriss was selected from a group of nine contenders. The board also engaged with more than 20 investors, including activist investor Elliott Management, as highlighted in their report.
Dan Schulman
Mr. Schulman led the company since its separation from eBay to become the first significant financial technology company to accept digital currencies for payments and transfers.
During his tenure, PayPal witnessed remarkable growth, with revenues soaring from $9.2 billion in 2015 to $27.5 billion in 2022. Active accounts surged beyond 430 million across 200 markets, more than doubling their numbers. Moreover, total payment volume experienced a fivefold rise, ascending from $288 billion in 2015 to $1.36 trillion in 2022.
“Together, we have reimagined financial services and e-commerce, and worked to improve the financial health of our customers,” Mr. Schulman said.
Dan Schulman revealed plans for his departure earlier this year. Mr. Schulman will continue to serve on the Board until its next annual meeting of stockholders in May 2024.
PayPal Loses CFO
On March 7, 2023, Blake Jorgensen announced he would step down from his position as Chief Financial Officer of PayPal Holdings, following a leave of absence for health reasons that started in September 2022. Mr. Jorgensen mentioned he will remain with the company as a senior advisor through September 15, 2023.
At the start of Mr. Jorgensen’s leave of absence in September 2022, Gabrielle Rabinovitch was named acting Chief Financial Officer, and she is expected to continue in that role.
Activist Involvement
PayPal has experienced activist involvement at various points. A prominent instance was Carl Icahn’s advocacy for the company’s spinoff from eBay in 2013, culminating in the sale of his stake in 2018. More recently, in August 2022, activist investment firm Elliott Investment Management made headlines by revealing its stake of over $2 billion in the company. This announcement came after PayPal reported a net loss and pledged to align its strategies with the objectives set forth by Elliott.
On August 14th, according to the Q2 2023 13F SEC filing, Elliott Investment Management exited its stake in PayPal. You can check out the rest of the changes to Elliott’s 13F portfolio in our Gurus section here.
PayPal introduces stablecoin PayPal USD (PYUSD)
Last week the company introduced its own stablecoin named PayPal USD (PYUSD), backed by the US dollar. Stablecoins are cryptocurrencies that derive their value from being pegged or tied to another currency, commodity, or financial instrument.
“The shift toward digital currencies requires a stable instrument that is both digitally native and easily connected to fiat currency like the U.S. dollar,” said Dan Schulman, president and CEO, of PayPal.
This enables individuals to engage in peer-to-peer transactions and transfer currency between PayPal and external wallets. Furthermore, PayPal’s stablecoin holds a redemption rate of 1:1 with the U.S. dollar, allowing one PayPal USD to be exchanged for one U.S. dollar, and vice versa.
According to Cointelegraph, PayPal USD (PYUSD) has adjusted its terms and conditions to introduce the Cryptocurrencies Hub. This feature empowers users to possess and engage with Bitcoin and other cryptocurrencies within their PayPal accounts.
PayPal Teams Up with KKR for European Pay Later Receivables
Private equity firm KKR (KKR) has agreed to purchase a substantial portion, or up to 40 billion euros ($43.71 billion), of payments company PayPal’s (PYPL) buy now, pay later (BNPL) loans in Europe. This transaction is expected to close in the second half of 2023. Upon closing PayPal anticipates ~$1.8 billion of proceeds.
Valuation:
PayPal’s stock has experienced a prolonged decline, dropping slightly over 30% in the past five years and approximately 41% in the last year. While its forward P/E ratio of 16.58 isn’t particularly low, it remains more competitively priced compared to rivals like Fiserv and Adyen, boasting forward P/E ratios of 31.10 and 83.85, respectively. It’s worth noting that Adyen became eBay’s chosen payment platform after formally ending its relationship with PayPal in 2020.
Second Quarter 2023 Results (Investor Presentation) (Earnings Release)
Balance Sheet and Liquidity
As of June 30, 2023,
Looking at the graph provided, a noticeable shift in PayPal’s strategy becomes apparent as it transitions from prioritizing acquisitions and strategic investments to placing a stronger emphasis on share repurchases since 2022, with a notable surge in both the frequency and scale of buybacks.
Conclusion
The digital payments sector’s growth due to e-commerce and diverse payment channels makes it appealing to numerous players. Though PayPal once held a leading position in digital payments, a slew of rivals like Zelle, Square, Stripe, and others have risen in recent years, which has led to heightened competition for PayPal. Moreover, Apple and similar firms are crafting their integrated solutions like Apple Pay, tightly woven into their devices.
Despite some of the challenges PayPal has experienced in the recent past, there is a lot to like about the company and the appointment of a new CEO was a catalyst I was looking forward to. I picked PayPal as a spotlight idea for our July 2023 Special Situations Newsletter and concluded the writeup as follows:
PayPal has pivoted in the sense that the company has begun to prioritize and develop its PayPal Braintree service – their unbranded transaction processing business which they first acquired in 2013. Total transactions per active account in Q1 2023 grew by 13% when compared to Q1 2022, and that growth was heavily driven by a 30% increase in total payment volume for the Braintree platform/service.
Its share of digital wallets in the U.S. and especially in Europe is significant. A combination of buybacks, insider buying and a C-suite transition put the company on our radar. I like the fact that the company is now focused on its core business and will continue to drive growth through the Braintree payments platform.
Appointments
1. Occidental Petroleum (OXY): $62.55
On August 9, 2023, Sunil Mathew was appointed Senior Vice President and Chief Financial Officer of the company effective as of August 9, 2023.
| MarketCap: $56.22B | Avg. Daily Volume (30 days): 9,297,806 | Revenue (TTM): $31.54B |
| Net Income Margin (TTM): 21.55% | ROE (TTM): 23.74% | Net Debt: $11.28B |
| P/E: 10.71 | Forward P/E: 15.48 | EV/EBIDTA (TTM): 5.23 |
| P/S (TTM): | P/B (TTM): 2.74 | 52 Week Range: $55.34 – $76.37 |
2. Discover Financial Services (DFS): $90.26
On August 13, 2023, the Board of Directors of Discover Financial Services appointed John B. Owen as Interim Chief Executive Officer and Interim President of the Company and as Interim President of the Bank, effective August 14, 2023.
| MarketCap: $23.24B | Avg. Daily Volume (30 days): 2,713,754 | Revenue (TTM): $10.79B |
| Net Income Margin (TTM): 36.38% | ROE (TTM): 28.42% | Net Debt: $10.61B |
| P/E: 6.43 | Forward P/E: 6.91 | EV/EBIDTA (TTM): N/A |
| P/S (TTM): 1.66 | P/B (TTM): 1.82 | 52 Week Range: $86.08 – $122.50 |
3. MercadoLibre (MELI): $1,247.44
On August 10, 2023, the Board of Directors of the company appointed Martín de los Santos, who currently serves as the company’s Senior Vice President of Mercado Credito, to serve as Senior Vice President and Chief Financial Officer, effective August 10, 2023.
| MarketCap: $64.42B | Avg. Daily Volume (30 days): 633,757 | Revenue (TTM): $12.14B |
| Net Income Margin (TTM): 6.23% | ROE (TTM): 39.51% | Net Debt: $2.23B |
| P/E: 86.63 | Forward P/E: 71.94 | EV/EBIDTA (TTM): 33.04 |
| P/S (TTM): 5.48 | P/B (TTM): 28.61 | 52 Week Range: $754.76 – $1388.39 |
4. FREYR Battery (FREY): $6.91
On August 10, 2023, FREYR Battery appointed Birger Steen as Chief Executive Officer of the company, effective August 21, 2023.
| MarketCap: $1.02B | Avg. Daily Volume (30 days): 2,131,095 | Revenue (TTM): N/A |
| Net Income Margin (TTM): N/A | ROE (TTM): -18.71% | Net Cash: $314.86M |
| P/E: -8.86 | Forward P/E: N/A | EV/EBIDTA (TTM): -5.43 |
| P/S (TTM): N/A | P/B (TTM): 1.61 | 52 Week Range: $6.20 – $16.94 |
5. U.S. Silica Holdings (SLCA): $12.28
On August 10, 2023, Jay Moreau was appointed to serve, effective August 14, 2023, as Executive Vice President and Chief Operating Officer of U.S. Silica Holdings.
| MarketCap: $948.54M | Avg. Daily Volume (30 days): 692,143 | Revenue (TTM): $1.68B |
| Net Income Margin (TTM): 9.20% | ROE (TTM): 21.59% | Net Debt: $769.58M |
| P/E: 6.21 | Forward P/E: N/A | EV/EBIDTA (TTM): 4.02 |
| P/S (TTM): 0.57 | P/B (TTM): 1.20 | 52 Week Range: $10.36 – $15.83 |
1. Occidental Petroleum (OXY): $62.55
On August 9, 2023, Chief Financial Officer Robert Peterson transitions to the role of Executive Vice President, Essential Chemistry, of Occidental Chemical Corporation effective August 9, 2023.
| MarketCap: $56.22B | Avg. Daily Volume (30 days): 9,297,806 | Revenue (TTM): $31.54B |
| Net Income Margin (TTM): 21.55% | ROE (TTM): 23.74% | Net Debt: $11.28B |
| P/E: 10.71 | Forward P/E: 15.48 | EV/EBIDTA (TTM): 5.23 |
| P/S (TTM): | P/B (TTM): 2.74 | 52 Week Range: $55.34 – $76.37 |
2. MercadoLibre (MELI): $1,247.44
On August 9, 2023, Pedro Arnt informed MercadoLibre of his decision to resign from his position as Executive Vice President and Chief Financial Officer of the company, effective as of August 10, 2023, in order to pursue a new opportunity.
| MarketCap: $64.42B | Avg. Daily Volume (30 days): 633,757 | Revenue (TTM): $12.14B |
| Net Income Margin (TTM): 6.23% | ROE (TTM): 39.51% | Net Debt: $2.23B |
| P/E: 86.63 | Forward P/E: 71.94 | EV/EBIDTA (TTM): 33.04 |
| P/S (TTM): 5.48 | P/B (TTM): 28.61 | 52 Week Range: $754.76 – $1388.39 |
3. FREYR Battery (FREY): $6.91
On August 10, 2023, FREYR Battery announced that Tom Einar Jensen will terminate his employment as CEO and appointed Mr. Jensen as Executive Chair of the Board on August 21, 2023.
| MarketCap: $1.02B | Avg. Daily Volume (30 days): 2,131,095 | Revenue (TTM): N/A |
| Net Income Margin (TTM): N/A | ROE (TTM): -18.71% | Net Cash: $314.86M |
| P/E: -8.86 | Forward P/E: N/A | EV/EBIDTA (TTM): -5.43 |
| P/S (TTM): N/A | P/B (TTM): 1.61 | 52 Week Range: $6.20 – $16.94 |
4. Discover Financial Services (DFS): $90.26
On August 13, 2023, the Board of Directors of Discover Financial Services accepted the resignation of Roger C. Hochschild from his positions as Chief Executive Officer and President effective August 14, 2023
| MarketCap: $23.24B | Avg. Daily Volume (30 days): 2,713,754 | Revenue (TTM): $10.79B |
| Net Income Margin (TTM): 36.38% | ROE (TTM): 28.42% | Net Debt: $10.61B |
| P/E: 6.43 | Forward P/E: 6.91 | EV/EBIDTA (TTM): N/A |
| P/S (TTM): 1.66 | P/B (TTM): 1.82 | 52 Week Range: $86.08 – $122.50 |
5. Fox Corporation (FOXA): $33.59
On August 11, 2023, the Fox Corporation announced that Viet D. Dinh will be transitioning from Chief Legal and Policy Officer to Special Advisor effective December 31, 2023.
| MarketCap: $16.14B | Avg. Daily Volume (30 days): 4,489,996 | Revenue (TTM): $14.91B |
| Net Income Margin (TTM): 8.31% | ROE (TTM): 11.28% | Net Debt: $3.94B |
| P/E: 14.60 | Forward P/E: 10.39 | EV/EBIDTA (TTM): 6.45 |
| P/S (TTM): 1.21 | P/B (TTM): 1.60 | 52 Week Range: $27.82 – $37 |
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