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eBay To Spin Off PayPal

Posted by Soulskill on from the watch-out-for-the-chargeback dept.

In 2002, eBay bought PayPal for $1.5 billion in stock. Nowadays, PayPal's yearly revenues exceed $7 billion, and investors are worried that eBay and PayPal together are too big to compete effectively. (They're also too big to be acquired, which is on their minds after the ludicrously successful Alibaba IPO.) To solve that problem, eBay today announced it will be spinning off PayPal in 2015, creating two separate publicly traded companies. eBay's current CEO is stepping down, and each of the companies will have a new CEO. "As part of the separation, eBay and PayPal will sign arm’s length commercial operating agreements to work together, with payments on both sides for various referrals and services. That’s no surprise since about 30 percent of PayPal’s business is still on eBay, although that is down from 50 percent only a few years ago."

8 of 76 comments (clear)

  1. So eBay would survive by jenningsthecat · · Score: 4, Interesting

    in the admittedly unlikely but highly desirable eventuality of PayPal going down in flames.

    --
    'The Economy' is a giant Ponzi scheme whose most pitiable suckers are the youngest among us and the yet-unborn.
    1. Re:So eBay would survive by meloneg · · Score: 4, Interesting

      I'd think the reverse is more likely, eBay going down in flames and PayPal surviving. PayPal has diversified and isn't nearly as reliant on eBay while eBay competition has grown and they've lost their original focus.

  2. Then eBay can become a bank. by Animats · · Score: 3, Interesting

    Then eBay can become a bank. In exchange for more regulation, they get to do lending and can borrow from the Fed.

    1. Re:Then eBay can become a bank. by nospam007 · · Score: 4, Interesting

      "Then eBay can become a bank. "

      Since July 2007, PayPal has operated across the European Union as a Luxembourg-based bank.

  3. Re:lol capitalism. by Noah+Haders · · Score: 4, Interesting

    are you familiar with the lone ninja paradox? the lone ninja is a force of silent death that cannot be stopped. He can climb buildings, sneak past guards, assassinate emperors, and accomplish any number of impossible tasks. But when you gather a bunch of ninjas into a large clan, they are essentially incompetent and will be defeated by pretty much any enemy, especially a lone ninja.

    hence the comment in the first sentence of the summary, "too big to compete effectively".

  4. Re:lol capitalism. by alexander_686 · · Score: 4, Interesting

    First, it has nothing to do with Alibaba's IPO and everything to do with Apple's new one touch payment.

    Second, being opposed to hostile takeover is a bad thing. I will put it simply, if you owned some stock of eBay, why would you want to discourage somebody offering you a price that is higher than it is trading for today? I mean, yes, one could insert poison pills and stuff to damage and tarnish your stock, decreasing it's value so people would stay away, but once again why?

    Most of the time it is managers, not the owners, who are opposed to hostile takeover. They face a bum choice. They could work hard to keep the stock price. Or they could slack off, be bought up, and then be fired. Of course they have pay packages in the millions so I don't feel too sorry for them.

  5. can someone dumb this down form me by Anonymous Coward · · Score: 2, Interesting

    Pardon my ignorance but i don't understand the term spin off in this sense. Ebay owns paypal now but wont after this is that correct? what compensation does ebay and its stock holders get for spinning off paypal. If they are not selling PayPal how do they make money from getting rid of it. If they are not making money why would they let this huge profitable part of the business go for free. can someone explain how the spin off works.

  6. This could be a good thing... by jonwil · · Score: 3, Interesting

    For example, if eBay no longer owns PayPal (or has any connection to it) they no longer have the incentive to force people to accept it (or like they did in Australia before they got in trouble for it, make PayPal the only method of payment).

    Also maybe this will impact the ability of eBay to do certain things they do now like holding money from an eBay auction instead of releasing it to the seller straight away.