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eBay To Spin Off PayPal
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."
Seems like not being open to a hostile buyout would be a good thing?
Light travels faster than sound. This is why some people appear bright until you hear them speak.........
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.
However, I would be enlightened to understand why the two of them are too big to compete in the market place. Isn't the the whole idea of constant acquisitions. To be so big that you can "optimize and synergize" every damn thing out there? Eh, maybe they are right. Bigger you are the worse you are at doing the mundane.
Then eBay can become a bank. In exchange for more regulation, they get to do lending and can borrow from the Fed.
Because being acquired makes you money? Just tossing it out there.
Hello eBaba!
Remember when they bought and sold Skype? ;-)
"Flyin' in just a sweet place,
Never been known to fail..."
Who says it must be hostile?
www.timcoleman.com is a total waste of your time. Never go there.
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".
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.
It's not that simple. Arbitrage generates huge opportunities to profit in the financial services sector. Fees for analysis, bond offerings, loan generation for the leveraged buyout, stock offerings, etc., stuff big pockets on Wall Street, not to mention all the market trading opportunities that emerge from the mere existence of these tradable financial instruments. And lest we not forget, there are always the ensuing opportunities to restructure, down size and increase productivity by outsourcing and cutting payroll. The Gordon Geckos and Timothy Geitners of the world, alike, salivate over the magnitude of such machinations, and it's a spectator sport too! (Even NPR seems obligated to report the daily state-of-Dow Jones Indutrial Composite Weighted Index Average, as if it reflects some measure of reality.)
I don't think you mean "Arbitrage" – I think you mean Mergers and Acquisitions. There was something called "Mergers Arbitrage" back in the 80s, but mostly that was speculators hiding behind the boring name of "Arbitrage".
And no, your logic does not make sense. The only reasons as a stockholder that I would agree to a merger or acquisition is because it would make money for myself. Do other parties make money off the deals – yes. Do they take too large of a cut of the profits? O.k. But your logic is arguing that newspapers hire journalist to burn down factories so they can sell stories about fires. I mean this has happened in the past but it is now how newspapers survive day to day.
PayPal's yearly revenues exceed $7 billion ... they're also too big to be acquired, which is on [investors'?] minds after the ludicrously successful Alibaba IPO
Just ask for dividends.
Seems like not being open to a hostile buyout would be a good thing?
Good for whom? Hostile buyouts are almost always bad for management, sometimes bad for customers, but almost always very good for shareholders. For a hostile buyout to be successful, they need to offer considerably more than most people think the company is worth. Otherwise, the shareholders will not approve of the deal in the face of management opposition.
If directors take action to ward off hostile takeovers, they are putting their own personal interests above the interests of the shareholders they have a fiduciary duty to represent. In my opinion, these actions should be illegal. In some countries they are.
address the customer service problems. I regard PayPal as unusable.
Despite his ego Icahn doesn't count as plural. I wish that guy would STFU and I also wish that the term "activist investor" would stop being applied to greedy people like him. It's not like he's promoting clean energy or trying to shut down sweatshops or such.
Interestingly, this was predicted quite a few years out. I wonder what took so long?
Kucera over at Bloomberg seems to be one of the earliest analysts to identify it back in very early 2012: http://www.bloomberg.com/news/...
how to the rich get richer? they have sponsors like carl icahn who come up with nefarious plans to squeeze profits from services, ahem, from customers.
Remember kids, if you're not paying for the service, YOU ARE THE PRODUCT THAT IS BEING SOLD.
A functioning organization/infrastructure that provides a useful service is something of value. You fail at economics.
I wonder what the over/under is on how long before the new ebay creates yet another version of PayPal?
Beware of Sales Reps bearing gifts.
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.
"investors are worried that eBay and PayPal together are too big to compete effectively." Ebay and Paypal don't compete. Ebay doesn't have any payment services (BillMeLater is also owned by Paypal). Paypal doesn't let people post items for sale.
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.
If you think ebay doesn't care about their customers, they care even less for their sellers. Unfortunately, ebay is crap, but it still has the largest audience in some places, so it's where people go. That's why ebay gets away with being complete scumbags to the sellers, since the customers, generally, are there.
I think this behaviour tends to be a rather typical american business practice when they have a captive market. They just want to screw everyone.
First, it has nothing to do with Alibaba's IPO and everything to do with Apple's new one touch payment.
How so?
Note to ACs: I usually delete AC replies without reading them. If you want to talk to me, log in.
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?
It is possible you are not familiar with turn-and-burn operations. A company I worked for once was acquired in a hostile takeover. Everyone was fired, most of the products were scrapped, the buildings and equipment went... all that was left was a quick profit for the takeover company and a few bits of software that could never be updated to remarket.
You are horribly ignorant or deluded if you are arguing that hostile takeovers are a good thing.
Hey, have you read “Barbarians at the Gate?”. It is a old but good book.
O.K., let walk though the logic. eBay is currently at $56.30. Let us assume you own eBay. Ergo, this mean you think it is undervalued.
First question, would you be willing to by my stock in eBay at $75? $60? 56.80?
Second question, if it is undervalued, why are you not buying up eBay until it's fair value? You have a compelling story and strong logic. Why not try to convince your friends to by the stock and charge them a fee? That is what essentially Hedge Fund managers do.
Third question – can you tell me specifically why you think eBay is priced below it's fair value. Using your logic every single stock being traded is being traded below it's fair value.
I can answer part of your third question. Some people buy stock because they want to own a fraction of future earnings. Other people hold onto the same stock because they think the company sucks but that there will be some type of catalytic event that will release shareholder value – such as an outside hostile bidder that will buy out the company, kick out the incompetent managers, and turn the company around.
Of course, it all comes down to one's opinion – right? When there is a hostile bid there is no reasons why people like you can't bid the stock up to the right level – it has happened . But when managers fight are they fighting for you for your own jobs. I will point out that 9 times out of 10, when a hostile takeover is launched – or even just a proxy fight – things happen. The company decides to sell itself off to another company, major restructurings, mass firings of board members.
Anecdotal evidence. You have 1 example. Here are my 3.
Warren Buffet's hostile bid on fabric manufacturer Berkshire Hathaway
Steve Jobs vulture bid on hardware manufacturer Pixar
KKR's hostile bid for RJR Nabisco, where executive where lining their pockets at the expense of shareholders.
Which takes us to being a Monday morning quarterback or a armchair general. Not know the particulars of your experience, most of the “striping” operations are over zombie companies that are slowly dying – worth more dead than alive. Isn't it better to do something with them before they are completely run into the ground?
And yes, like you, I have been though one of these as a employee.
Look at the PayPal's press from 15 years ago. They were going to revolutionize the payment industry – distributing old players. Read BitCoin's press from last year and you get the idea.
And then for the next 10 years . nothing. Don't get me wrong, it is a nice niche player but it has not innovated like Square.
And now comes Apple. One Touch was what PayPal was promising 15 years ago. I suspect this is just the first narrow wedge. Apple will expand its payment services.
So how is PayPal going to get its grove back? Shuffling the boxes on a company's org chart is probably just step one.
Most of what PayPal is used for doesn't have any physical customer interaction. For example, it's one of the few payment services I trust enough to make payments to small manufacturers in China. For that kind of transaction, One Touch is useless unless 1) I'm willing to pay several hundred dollars in down-payment on an Apple device, 2) fly out to China each time I need to pay for something. While One Touch might work for your local shopping mall, IMO Apple is getting into that market just as the market is trending towards the way Paypal operates, with purchases made online.
Help I am stuck in a signature factory!
Apple Pay isn't new. It's just another spin on what Google and ISIS (now SoftCard) did before it. The reason PayPal didn't change the world was because the financial industry is owned by the banks, and they don't allow it to be changed except in the ways they want. Many have attempted to bypass them, or undermine them, and none have succeeded. PayPal didn't do it in the past and isn't going to in the future. Neither is Apple.
Note to ACs: I usually delete AC replies without reading them. If you want to talk to me, log in.
The holy grail for me would be the ability to make payments on Amazon using PayPal, something not currently possible since they are rival companies with eBay in the mix.
But once it gets spun out or sold, perhaps, maybe, Amazon will begin accepting it. And I would love that.
Sig for hire.
What you say is true - for today. Bu t I still think it is the thin wedge that Apple will use to get into the payment transactions. Apple is not going to stop where it is at. But right now PayPal is kind of dead in the water. What is the last big thing that they did. While not a direct move on PayPal this is a bucket of cold water on PayPal's face, telling them to wake up and start moving.
In response to one anecdote, you post a few more? That's not data. If you want to get smart about it, get smart about it. Show me the evidence.
Sure. Can you be a bit more specific on what you are looking for? The M&A academic field is huge. Do you want to talk about 1980s style turn and burn? Those where abusive thanks to a flaw in pension accounting. However, that flaw has been fixed. Zombie companies? Bank mergers of the 90s? Give me some place to start.