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PayPal Goes Public
fluffhead234 writes: "Looks like IPO's for internet companies can still bring in something. PayPal, the online payment people, raised just over 70 million in their IPO: PPay Pal IPO"
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Why on earth do they need to raise funding through an IPO when they have all those frozen accounts to dip into?? :)
Looks like IPO's for internet companies can still bring in something.
IPOs always bring in something; an IPO just means that the institutions that are underwriting it buy a set amount of stock, then offer it for sale on the market. The company itself risks nothing, as the stock was bought for an agreed-upon price beforehand.
If the stock tanks, they still get 70 million.
I think it's interersting that paypal both created (and jumped on) a new marketplace: easy, convenient, secure online funds transfers _for_the_little_guy_. Thanks to Paypal, instead of paying 2-3% to Visa/MC (Amex is the worst: it used to be 7% surcharge) and getting a credit card scanner, anyone could accept credit cards. But then they blew it. Poor security, aweful customer service... I was an early adopter, and really liked the service when it came out. They saw a market, assessed the needs, and then... ignored them. Oh Paypal, what happened? You could have been so great... but now they're just one of a thousand.
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Just like Ebay, Paypal is successful (and I mean by # of users and money exchanged, not profit-wise, which only ebay has attained) because they were first. Both charge higher rates than their competitors without any better service or features.
Ebay has a bunch of users because their business model requires that many people come together in one place; Yahoo Auctions, for example, are horrible in comparison if only 1/2 the people use them (and the #'s aren't even that high).
PayPal just basically rode off Ebay's success and Ebay's lack of making any decent alternatives (BillPoint started off way too expensive and full of hassles).
Does anyone remember the LONG period where PayPal gave $5 to each user and $5 for each referral, even if you never used their service? I had a slightly popular website and made nearly $200 off of referrals. I've used PayPal, but only as a sender, so I've never given PayPal a dime back.
I think PayPal is near the peak of its popularity; once ebay's BillPoint starts getting more users (as Ebay is pushing it more on users and the fees are more reasonable for the market) and better alternatives arise (like citibank's c2it for a bad example), PayPal will decline in popularity. They haven't reached anything near a profit yet and I doubt they ever will.
Jeremyf's rating: Sell
There's a an article over at http://www.ipofinancial.com/pow/archive.php?oid=10 4 which has a bit more info, from a financial analyst's viewpoint, but in plain english.
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.BOOM), paypal doesn't and hasn't made a profit. keep that in mind.
this actually held up the first attempt at an IPO several weeks ago.
another thing to remember is, unlike most business that IPO today (and not in the
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In fact, there is a growing literature which suggests companies purposely limit the number of shares issued in the IPO. This low supply of shares causes the stock to rise in the ensuing days and months as additional investors purchase the stock and analysts begin issuing recommendations. After the lockup, insiders then begin to sell shares in earnest at these high prices which are at least in part due to the manipulative effects of a small number of shares offerred at the IPO. In short, while there may be short-term gains to be made in the stock, be cautious after the lock-up expires.
Also note that in the past two years the company has managed to lose 1/4 of a billion bucks and is not sure when it will be profitable. That's not exactly the kind of words that bring confidence in this market environment.
Although the market for IPO's was much smaller in 2001 than in years past, those companies that did come public tended to be more profitable and had better business models and a proven record of success; and they performed relatively well. I don't think PYPL fits this mold, however, so LOOK OUT BELOW! (after a short run upwards).
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Any institution that accepts money for "deposit" is by law, subject to the regulations of a bank. Federal regulators haven't fully caught-on to what PayPal does.
The IPO will make for their easy slaying in federal court.
- 1. They have an excellent group of talented people and an excellent corporate culture. Talented, bright people who are dedicated to their jobs...what else can you ask for. They have excellent management and have the ability to move fast and adapt to change quickly.
I am a fan of their service and a fan of the people who work there, but it saddens me that they may be in a good amount of trouble in the times to come. As a number of people have pointed out, several states are threatening to shut them off for doing business as an unlicensed bank. This causes a number of problems for PayPal and they need to address them soon:2. They've found a business model that works. It seems that anyone making or taking a payment over the Internet these days has a PayPal account. Most importantly, however, if you take a look at their growth rate and their balance sheet, you will see that they are on track to start making some real money very quickly.
- 1. The states are right: PayPal is doing business as an unlicensed bank. You may have noticed that PayPal is not protesting any of the allegations made by the states - that's because they know if it came down to a fight in court, they would lose. They are a bank...no question about it. In fact, they've already had to give in to a few states, as they actually ARE regulated in few (3, I think)
Continue to use PayPal...it's a great service (Yes, there are the stories at www.paypalwarning.com and such, but any service with 1mil+ customers will have some unhappy people). Be cautious, however, if you are thinking of investing in them.2. "So why don't they just get licensed as a bank?", a number of people ask. There are a number of things that make this difficult. First, the license process must occur in each state - this takes a lot of time and money. Second, this may greatly change their internal cost structure, as there are a number of regulated practices that they would have to adhere to if they were considered a bank in all the states they did business in. PayPal's margins are low and their real money is made on volumes - a major change in their cost structure and, particularly, how they hold floating funds may be lethal to their business.
3. The Internet has no boundaries: If PayPal is shutdown by even one state they are in major trouble. If Louisiana, for example, shuts them down, PayPal must ensure that they do not mediate payments between any parties that live or do business in Louisiana. PayPal currently identifies individual's location by verifying (via US Mail) the address associated with a credit card or bank account. This presents a number of problems: What if the billing address of my credit card is a Mississippi address, but I actually reside in Louisiana - how will PayPal know they are performing transactions on behalf of a Louisiana resident? What if the routing number relates to a bank branch in Mississippi, but I reside in Louisiana, where that bank also has a branch (making it possible for a Louisiana resident to do business in Louisiana with a Louisiana bank through PayPal)? This is just a Pandora's box waiting to be opened.
4. The banking lobby is strong: And they don't like non-banks getting into their space. Worst of all, PayPal has proven that this business model will work. A number of "real banks" are salivating to take this space over.
Mostly because it is a means of further verifying that you are who you say you are. Since they are not shipping you the products you purchase from Ebay, they have no way of doing even that most basic verification...checking that billing address and shipping address are the proper ones listed on the credit account.
Credit card fraud is pretty damned rampant on the internet anyway, and there's tons of fraud (CC and otherwise) on Ebay. Combine all that into one big lump that PayPal has to deal with, and they have to take measures like that to protect themselves. Most major credit card issuing banks have really stepped up the penalties for sites that do not have sufficient anti-fraud measures in place.
"That's Tron. He fights for the Users."
Louisiana has declared PayPal to be a money transfer system (duh!) and that they require licensing from the state to do business in the state.
Since they don't have such a license, they have to quit doing business in Louisiana. Other states are following....
Full article here:
Yahoo News Article
www.slightlycrewed.com - Because aren't we all?
I love PayPal. I use it regularly for buying and selling on eBay (sometimes several thousand dollars a month), for giving online donations, and for occasional general money-sending.
I have never had any problems with them. Their customer service has replied with real answers most of the time, the web page has been inaccessible once or twice, but other than that has never had any big problems. I have a merchant-level account, with a low fee (lower than Billpoint's regular rate, for sure). I take my money out every time I receive it, or I use the very handy Debit card to buy something. And they even TELL you when they change their terms of service!!
eBay's billpoint? Junk! They really missed the boat when they bought them. The PayPal model, where they hold your money, has many more possibilities, including the debit card, bill payment, and investing (X.com style). Of course there are more possibilities for fraud too, but from a features point of view, PayPal wins. Plus my biggest problem with Billpoint, I can't sign up my multiple eBay accounts and addresses, but with PayPal, there's no problem.
But, being the jaded and cynical fellow I am, I know that happy feeling will disappear very soon.
Now PayPal, which is essentially an UNREGULATED bank that deals in short-term loans from customers (essentially, I am loaning them my money for short periods of time), now they don't have an obligation to their customers, they have an obligation to their SHAREHOLDERS. I'm very afraid, and everyone else should be the same.
I guarantee they will do one or more or all of the following: 1) abuse patents .. 2) hide and massage the fee structure (how about charging 1% to withdraw YOUR OWN money.. that would be a good start).. 3) change the terms of service WITHOUT notification (why slow things down like that?).. 4) piss of the credit card companies who will stop allowing them to use their credit cards and logos.. 5) piss off enough people so that the government steps in and over-regulates after several state lawsuits..
Who, knows, maybe I'm overreacting, maybe, like eBay, they will stay good after their IPO. But of course eBay was profitable very quickly, maybe that kept the shareholders happy. PayPal is in a unique and tempting position, and can easily screw over MANY people for their quest to profitability.
What do you folks think? Along with eBay, I consider PayPal one of the few actual "innovations" that the Commercial Internet(tm) has brought us.
banking is like lawyers. It's full of the most corrupt and evil people on the planet. Banks happily turn huge profits while at the same time happily throwing it's customers under the bus by raising fees, adding fees, dropping service and quality. Why? because they know thay can abuse you as a customer and you won't do squat. What are you gonna do? take your measley $10,000 elsewhere? they dont care.. They care about the guy with $500,000 or more in the bank... they dont get fees, are treated nicely and even recieve thank you notes in the mail.
90% of a bank's customers are unwanted by the bank. They wish they could get laws passed that would allow them to refuse service to all but the very wealthy, and charge you a service fee for the privilidge of being paid by a wealthy person.
The differnce between a bank and an illegal loan shark is that the bank has a building and a sign (maybe the leg breaking part, but then the banks just come and take everything you own and tattoo a giant L on your forhead). Other than that they are 100% identical... and unfortunately in the world there is no alternative to turn to.
Do not look at laser with remaining good eye.