Michael Burry opposes Pay Pal offer: '$60.50 is too low'
According to news, the payment company Stripe has joined forces with the large private equity company Advent International to acquire PayPal Holdings ( : PYPL) made a huge takeover offer worth a total of US$53 billion. The combined offer price of $60.50 per share represents a 28% premium to the stock's Tuesday closing price of $47.37. However, Michael Burry, the prototype investor of "The Big Short", believes that the offer is not considered generous, but is just an initial offer to test the price. Burry recently listed PayPal as a core deep value holding target, and he immediately bluntly stated that the acquisition bid was seriously low. Burry issued a statement based on his own intrinsic value calculation model: "The acquisition price only corresponds to 1.21 times the 15-year intrinsic value, which is too low. This offer confirms that PayPal itself has extremely high value, and I believe that the acquirer must raise the price significantly." Burry said that PayPal is one of the companies with the lowest valuation and the best quality among all its holdings, and its current stock price is far below the company's intrinsic value. Therefore, in order to complete the acquisition, the offer must add a high control premium on top of a reasonable baseline valuation. Bury not only simply rejected the offer, but also provided the basis for calculating the fair purchase price: 10-year intrinsic value (IV10) calculation: PayPal’s reasonable baseline valuation range is US$75–80 per share; 8-year intrinsic value (IV8) calculation: the benchmark valuation further rises to US$110–115/share; Fair deal price: Combining 10-year intrinsic value with conventional control premiums, a fair offer that would actually get the deal done is around $100/share. In Bury's view, the overall $53 billion valuation is just a starting point for negotiations. He made it clear: "The offer of $60.50 is too low. I will not sell my position. This is just a first-round test offer." If Burry's judgment is true, Xtron and Advent must significantly increase their acquisition funds if they want to privatize this leading digital payment company.