Class Action Clouds PayPal’s Future as Takeover Speculation Emerges
PayPal faces shareholder class action lawsuit alleging top executives misled investors concerning Managed Checkout growth potential as rumors swirl that the beleaguered payments company could be snapped up by larger competitor or broken up and sold off in parts.
The suit stems from disappointing earnings and a surprise leadership shake-up earlier this month, sending the stock dropping ~20% in a single day.
PayPal issued a lackluster profit forecast for 2026 during its Q4 2025 earnings call while also announcing CEO Alex Chriss, who was brought in to steer the payments firm through slowing growth and heightened competition, would be stepping down immediately.
Liz Morton
Multiple shareholder rights firms opened investigations after the call and now Levi & Korsinsky, LLP officially filed suit on February 17th on behalf of plaintiff Aaron B. Goodman, seeking to establish a class action that could potentially include thousands of other plaintiffs who purchased or otherwise acquired PayPal common stock between February 25, 2025, to February 2, 2026.
The suit alleges:
Defendants provided investors with material information concerning PayPal’s expected financial targets for 2027 alongside the growth trajectory for its core branded checkout segment (“Branded Checkout”). Defendants’ statements included, among other things, confidence in PayPal’s ability to capitalize on its growth potential through new initiatives to facilitate Branded Checkout growth both in the U.S. and internationally.
Defendants provided these overwhelmingly positive statements to investors while, at the same time, disseminating materially false and misleading statements and/or concealing material adverse facts concerning the true state of PayPal’s salesforce; notably, that it was not truly equipped to execute on the Company’s perceived growth potential and were “too optimistic” as to how easily and expeditiously its staff could change customer adoption.
Such statements absent these material facts caused Plaintiff and other shareholders to purchase PayPal’s securities at artificially inflated prices.
On February 3, 2026, PayPal announced its financial results for the fourth quarter and full fiscal year 2025, unveiling disappointing earnings results with worsening performance in Branded Checkout. The Company also unveiled a sudden and surprising transition of its Chief Executive Officer role alongside the below-expectation results.
PayPal further withdrew its 2027 financial targets provided one year before and announced projections that suggested a slowdown against those prior targets. PayPal attributed its results and lowered guidance to a combination of macroeconomic factors competition, and “operational and deployment issues” across all regions.
Investors and analysts reacted immediately to PayPal’s revelation. The price of PayPal’s common stock declined dramatically. From a closing market price of $52.33 per share on February 2, 2026, PayPal’s stock price fell to $41.70 per share on February 3, 2026, a decline of about 20.31% in the span of just a single day.
The 40+ page complaint goes on to provide examples of those allegedly overly-optimistic statements from previous earnings calls and investor events, highlighting the disparity between what executives publicly presented and what was revealed in the most recent report.
Meanwhile, the stock price popped ~6% today on reports from Bloomberg (paywall) that the company is receiving unsolicited takeover bids from unnamed potential buyers with one large competitor said to be considering snapping up the whole operation while others are only interested in certain PayPal assets.
REINHARDT KRAUSE
The lawsuit is Goodman v. PayPal Holdings, Inc. et al California Northern District Court Case#: 5:26-cv-01381
Full initial complaint:
