PayPal ($PYPL) – Venmo & a Notes Offering – May 25, 2024
Venmo
Venmo has been under-monetized for years. It’s one thing for a Meta to take its time on something like WhatsApp monetization while it prints cash and finds scaled growth elsewhere, but PayPal doesn’t have that luxury. PayPal needs to turn on this money faucet yesterday. This week, I got an interesting notification from Venmo. Starting in July, all goods and services-tagged payments will be charged a standard 2.99% transaction fee. These have functioned as free peer-to-peer payments to date. This allows Venmo to extract value from its budding business profile base to turn all of the loyal traffic, volume and attention this verb-of-an-app has into real revenue. What a concept. This will be highly incremental to transaction margin as well. Venmo is already orchestrating this volume, it’s just not making any money from it. The costs will not scale with the added revenue contribution from this change, and traction here could mean Venmo joins Braintree, a potential branded recovery, Fastlane and the stable coin as dearly needed profit tailwinds.
Notes Offering
PayPal raised $850 million in 5.15% convertible senior notes (CSNs) due in 2034 and $400 million in 5.50% CSNs due in 2054. Proceeds are expected to be used to refinance $1.25 billion in notes maturing this October.
