PayPal Holdings will report a US$228 million (NZ$362 million) loss on investments before taxes in the third quarter, driven in large part by a bad bet on Uber Technologies Inc. just before it went public.
The San Jose, California-based payments company said the investment in Uber, for US$500 million at the initial public offering price, had declined 34 per cent. Another investment, in Latin American online retailer MercadoLibre Inc., had declined 10 per cent, PayPal said.
PayPal's stake in the world's largest ride-hailing business was tied to what the companies described as a closer collaboration on payments technology. Uber is the most prominent app to use PayPal's nascent Pay With Venmo feature. But Uber's stock has under-performed due to a combination of slowing growth and accelerated losses.
A PayPal spokeswoman said the company's guidance doesn't incorporate expectations for stock price performance of their investments during the quarter given the "inherent difficulty" in predicting market fluctuations. PayPal said its investments have still generated unrealized gains for the company this year, due to better performance in earlier quarters.
Following the report, Mark Palmer, an analyst at BTIG, said he now expects earnings per share of 54 cents for the third quarter, down from an earlier projection of 69 cents. PayPal reports earnings on Oct. 23. The stock was up less than 1 per cent to $99.93 at 11:22 a.m. in New York.