Mobile Payments Titan PayPal Buys iZettle

Not so long ago, we heard about PayPal and its fairly cavalier response to Amazon poised to get in on the mobile payments market. Perhaps it was cavalier because it was holding close to the vest its plans to buy iZettle, which it did only recently. Our friends out at Mizuho Payments dropped word our way about this arrangement, however, and the perception therein is a bit grim.

Mizuho noted that its overall rating on PayPal remained the same—neutral—even after the announcement for several reasons. First, the amount paid for PayPal is seen as entirely too much; PayPal agreed to an all-cash deal for $2.2 billion, and this is following reports that iZettle was looking to list itself on the Stockholm NASDAQ at a valuation of around half that. Moreover, recent reports also suggested that iZettle is looking to be profitable sometime in 2020.

A statement from Dan Schulman, PayPal’s CEO, adds precious little light: “iZettle and PayPal are a strategic fit, with a shared mission, values and culture – and complementary product offerings and geographies. In today’s digital world, consumers want to be able to buy when, where and how they want….”

PayPal is planning to discuss the deal in more detail next week during its analyst day events, but it’s going to need to talk about quite a bit to convince many that this isn’t just a huge waste. Some of the numbers do help out; for instance, iZettle had 413,000 active users in 2017, and while it’s focused on Europe, it also offers solutions for both Brazil and Mexico.

Still, it’s hard to see why PayPal was willing to drop roughly double the company’s own valuation ahead of its planned listing. Sure, PayPal could use some further shoring up of its numbers especially given that eBay is still planning someday, maybe, to drop PayPal from the roster. For PayPal to shell out that kind of money to make more eventually, though, almost smacks of desperation, especially after Schulman just told all and sundry that PayPal’s super-diversified as it is.

There’s something off about this whole arrangement, but just what it is, I’m not sure. Maybe I’m just jumping at shadows and it will all turn out well in the end, but something about this is off.