PayPal Holdings (PYPL.O) was poised to increase its market value by $4 billion as it pleased investors with a commitment to streamline operations, even though the payment giant revealed that it had received a subpoena from the U.S. Securities and Exchange Commission related to its stablecoin.
Before the stock market opened on Thursday, the company’s shares surged by 7% to reach $55.16, driven by a strong full-year profit outlook that alleviated concerns about a potential reduction in spending.
In a post-earnings call on Wednesday, the new CEO of the company, Alex Chriss, succinctly expressed the issue, stating, “In simple terms, our cost structure is currently too high.” He also added that PayPal would realign its resources to focus on its most profitable growth priorities.
The positive outlook emphasized the financial resilience of consumers, enabling them to sustain their spending habits despite an uncertain economic environment.
J.P. Morgan analyst Tien-tsin Huang commended Chriss for addressing the company’s challenges effectively and outlining a sound plan to enhance growth and profitability, noting that “Chriss struck the right note.”
William Blair, a brokerage firm, also expressed encouragement regarding the company’s narrowed focus on profitable growth.
As for the U.S. Securities and Exchange Commission (SEC), their subpoena signals their ongoing scrutiny of the cryptocurrency industry, despite a recent high-profile court case loss against digital asset manager Grayscale Investments.
PayPal stated its cooperation with the SEC’s Enforcement Division’s document request in response to the subpoena. Stablecoins are digital tokens whose value is linked to a stable asset to mitigate the potential for price volatility and protect investors.
In August, PayPal made history by becoming the first major financial technology firm to embrace digital currencies for payments and transfers when it introduced its dollar-backed stablecoin.