PayPal Soars on 'Leaner' Pledge and Upbeat Forecast Despite SEC Subpoena on Stablecoin
PayPal affirmed its cooperation with the SEC's subpoena, which originated from the SEC's Enforcement Division and requested the production of documents.
PayPal is set to add $4 billion to its market value as a pledge to become "leaner" lifts investor spirits. This positive outlook comes despite the payments giant disclosing a subpoena from the U.S. Securities and Exchange Commission (SEC) related to its stablecoin, according to report by Reuters.
Before the opening bell on Thursday, the company's shares soared by 7% to reach $55.16. This surge was driven by an optimistic full-year profit forecast, effectively easing concerns about a potential spending slowdown.
In post-earnings call on Wednesday, PayPal's new CEO, Alex Chriss, straightforwardly addressed the issue, stating, "Simply put, our cost base remains too high." He further announced the company's intention to streamline its resources, aligning them with its "most profitable growth priorities."
The encouraging forecast underscores the financial resilience of consumers, allowing them to sustain their spending habits even amidst economic uncertainties. This focus on becoming "leaner" was well-received by analysts and investors. Tien-tsin Huang, an analyst at J.P. Morgan, praised Chriss for addressing the company's challenges and outlining a clear plan for improving growth and profitability. William Blair, a brokerage firm, also expressed its optimism about PayPal's more concentrated focus on profitable growth.
Meanwhile, the SEC's subpoena to PayPal suggests that the regulator is maintaining its scrutiny of the cryptocurrency industry. This action comes shortly after the SEC's loss in a high-profile court case against digital asset manager Grayscale Investments.
PayPal affirmed its cooperation with the SEC's subpoena, which originated from the SEC's Enforcement Division and requested the production of documents. The focus of the SEC's interest is PayPal's stablecoin, a type of cryptocurrency that is pegged to a stable asset, aimed at safeguarding potential investors from the extreme price fluctuations often associated with cryptocurrencies.
Notably, PayPal made a groundbreaking move in the financial technology sector by embracing digital currencies for payments and transfers when it launched its dollar-backed stablecoin in August.
