A smartphone with the PayPal logo is placed on a laptop in this illustration taken on July 14, 2021. REUTERS/Dado Ruvic/Illustration/File Photo Acquire Licensing Rights
Nov 2 (Reuters) – PayPal Holdings (PYPL.O) was set to add $4 billion to its market value as a pledge to turn “leaner” cheered up investors, even as the payments giant disclosed a subpoena from the U.S. Securities and Exchange Commission tied to its stablecoin.
The company’s shares climbed 7% to $55.16 before the bell on Thursday as a strong full-year profit forecast also calmed market jitters about a spending slowdown.
“Simply put, our cost base remains too high,” the company’s new CEO, Alex Chriss, said on a post-earnings call on Wednesday, adding that PayPal would align its resources to its “most profitable growth priorities.”
The upbeat forecast underscored the robustness of consumers’ financial health, which has allowed them to keep up with their spending binge even as the economic climate remains uncertain.
“Chriss struck the right note and articulated well the challenges facing the company and described a sound framework for improving growth and profitability,” J.P.Morgan analyst Tien-tsin Huang said.
Brokerage William Blair also said it was “encouraged by management’s narrowed focus on profitable growth.”
SEC RAMPS UP PRESSURE ON CRYPTO
The SEC’s subpoena indicates that the regulator is keeping up pressure on the cryptocurrency industry despite recently losing a high-profile court case against digital asset manager Grayscale Investments.
PayPal said it was cooperating with the subpoena, which came from the SEC’s Enforcement Division and asked for the production of documents.
Stablecoins are crypto tokens whose monetary value is pegged to a stable asset to protect potential investors from wild swings in prices.
The company became the first major financial technology firm to embrace digital currencies for payments and transfers when it launched its dollar-backed stablecoin in August.
Reporting by Niket Nishant in Bengaluru; Editing by Sriraj Kalluvila and Saumyadeb Chakrabarty
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