PayPal operates one of the best-known digital payment platforms, enabling both merchants and consumers to make digital and mobile payments worldwide. Over 90% of the Company’s revenue is generated through fees on payment transactions.
The Complaint alleges that that throughout the Class Period, the defendants made materially false and/or misleading statements and failed to disclose material adverse factors about the Company’s business, operations—specifically the Company’s increased reliance on cash incentive campaigns for account creation that invited a deluge of illegitimate PayPal accounts that would boost PayPal’s numbers but would generate no revenue for the Company. Specifically, defendants misled investors and/or failed to disclose that:
- defendants had inflated its vitally important NNA metric guidance through an usually large use of marketing campaigns that were easily susceptible to fraud;
- defendants used these marketing campaigns and other incentives to hide the Company’s true churn rate and declining levels of engagement with the platform; and
- as a result, defendants’ positive statements about the Company’s business, operations, and prospects were materially false and misleading and /or lacked a reasonable basis at all relevant times.When investors learned the truth about PayPal’s inflated NNA figures, the price of its common stock fell $43.23 per share in one day, dropping from a closing price of $175.80 per share on February 1, 2022 to close at $132.57 per share, on February 2, 2022, a one-day decline of approximately 25%.