The stock rose nearly 3% at the news, but PayPal's share price has declined 15% since the start of the year
PayPal is bringing in fresh blood for the top job. Alex Chriss, who has had a successful run at Intuit, will take the reins from Dan Schulman at the end of September. PayPal has been on the hunt for a new CEO since Schulman first announced his retirement plans earlier this year.
Chriss has a big task ahead of him as the stock continues to decline while other tech companies have thrived in 2023. If it can pull it off, launching PayPal's new stablecoin might be the fintech's saving grace. Here's everything you need to know.
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Alex Chriss, a high-level executive at Intuit, is stepping into the CEO at Paypal from the 27 September. Chriss has been executive vice president and general manager of Intuit's small business and self-employed group, which is responsible for half of Intuit's revenue, since 2019.
It's a drama-free changing of the guard - Dan Schulman, who has been CEO since 2014, had previously announced his plans to retire. He will transition to a director role until next May.
Chriss will bring small-business experience to PayPal, which has its own Commerce Platform for small and medium businesses. Chriss also led Intuit's $12 billion takeover of email marketing business Mailchimp in 2021.
"The Board search committee worked diligently and thoroughly to find the right candidate to take PayPal into its next stage of growth and expansion, and we are confident Alex is that person", John Donahoe, PayPal's board of directors chair, said about the appointment.
There's not an easy task ahead for the buzzy new CEO. The company's share price peaked in the summer of July, reaching over $308 per share and giving PayPal a market cap of over $360 billion. Those days are long gone: the stock is trading at $63 and has a market cap of $70 billion.
Sure, many stocks had a bad 2022 performance in the bear market. But there's more to PayPal's steady decline. A stream of high-level executives have left the company since 2021. CFO John Rainey, the senior vice president of Omni-payments solutions Jim Magats and Darrell Esch, who headed up the Venmo division, all departed the company in recent months.
Then last week, another one bit the dust with chief strategy, growth and data officer Jonathan Auerbach announcing his resignation. With Schulman gone as well, Chriss needs to build deep-bench expertise at the executive level.
The company has been on a massive cost-saving effort, having reported last year that 'bad actors' and bots were signing up for PayPal's services and that they no longer expected to achieve 750 million active users by 2025.
Like many other companies, outgoing CEO Schulman has been on a cost-slashing exercise to combat the post-pandemic slump. PayPal announced earlier this year it was laying off 2,000 employees, eliminating around 7% of the company's workforce. PayPal's also been steadily shuttering unused offices in San Francisco, Ireland and other locations.
Schulman has previously stated the cost-saving efforts have helped PayPal to rack up $900 million in savings in 2022 and an anticipated $1.3 billion this year. However, these moves still haven't helped the company's stock performance.
PayPal's share price has declined 15% this year, though the stock bounced up 2.8% at the news of Chriss' CEO appointment. It was a much-needed gain for the share price after PayPal's second-quarter earnings left Wall Street disappointed.
For Q2, PayPal's metrics looked fine - it reported a non-GAAP profit of $1.16 a share when analysts had predicted $1.15, and the $7.3 billion revenue result topped forecasts of $7.27 billion. However, PayPal's operating margin fell from 22.7% last quarter to 21.4%, while the fintech's loans portfolio has also declined 26% sequentially. Active users also fell to 431 million, marking a pattern of decline. PayPal's share price fell 12% at the earnings beat.
In other news, activist investor Elliott Investment Management has now dissolved its stake in PayPal; the investment firm was gearing up to become one of the five biggest shareholders in the company as it planned to push PayPal to speed up its cost-cutting efforts last year. The activist investor may have pushed for Schulman to step aside, but the stock is still trading far below 2021 highs.
Something Chriss can get his teeth into is crypto, with PayPal announcing its own U.S. dollar-backed stablecoin earlier this month. PayPal USD (PYUSD) would allow customers to make person-to-person payments and transfer different cryptocurrencies between PayPal and other wallets.
Cash deposits, short-term T-bills and other cash equivalents back the stablecoin, which is set to be issued by Paxos Trust Company. The firm is financially supported by PayPal and issues the Binance USD stablecoin.
Cointelegraph first reported that PayPal had updated its terms and conditions to include mention of a new cryptocurrency hub, where its customers can manage other crypto assets alongside their PYUSD.
It's a solid bet from PayPal (or as reliable as it gets with crypto, at least) because it has brand recognition that could give crypto assets a friendly face. At the time of the announcement, Schulman said that digital currencies "requires a stable instrument" like the US dollar to thrive. With the industry battered by regulation mishaps and outright fraud, perhaps PayPal can step in and turn around the sector's fortunes.
With the company bleeding talent and a sharp decline in share price, PayPal is at a pivotal moment - and Chriss likely knows it. The board is backing someone with a proven track record of delivering growth.
As the company ventures into the cryptocurrency realm with its stablecoin, this move, combined with Chriss's leadership, could herald a resurgence for the fintech giant. Investors will be paying close attention in the coming months.
With a new CEO installed, PayPal's fortunes may be about to turn around and join the tech market's comeback in 2023. Your portfolio doesn't have to sit on the sidelines with Q.ai's Emerging Tech Kit, which neatly packages up tech stocks and ETFs, so you don't have to navigate the volatile market alone.
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