Friday - Aug 18, 2017

Ebay to cut the cord on PayPal


Ebay to cut the cord on PayPal

Online auction site Ebay has announced their plans to spin off massive online payments processor PayPal.

Shareholders in Ebay are generally reported to be less than happy with the decision, which will leave a major shareholder in the balance sheet as PayPal are estimated to currently account for around half of the companies $65 billion stock market value

EBay’s decision to spin off PayPal comes after a long battle activist investor Carl Icahn who has faced considerable pressure on the company to divest their interest in the company which they purchased in 2002 for $1.5 billion, and went on to become one of the survivors and even major successes from the original generation of online pioneers.

Industry observers point to the fact that the sell-off of PayPal, coming just a few years after eBay sold off instant messaging service Skype to Microsoft, represents the final dismantling dismantling of eBay’s strategy to diversify into much more than an online auction business, albeit the largest in the world.

Many of the original brains behind PayPal and Ebay including their founder and chairman Pierre Omidyar, as well as PayPal founder Reid Hoffman as well as more passive venture capitalists Peter Thiel, Elon Musk and Marc Andreessen were all particularly vocal in their resistance to the sell-out, each of them providing support to eBay’s chief executive John Donahoe in denouncing Icahn’s campaign.

However, it now appears that splitting the need to industry giants is now inevitable, and that PayPal will be listed as a publicly traded company when the split takes effect, sometime during 2015.

Donahoe, who will be stepping down as chief executive of Ebay once the demerger has been successfully completed, hastened to defend what was described as a climbdown explaining that the situations in the online payment processing sector had changed drastically during the last few months, with increased competition arriving in the form of industry giant Apple, who recently announced that they will be introducing a form of payment system for their latest iPhone, the 6 and the recently introduced iWatch.

The stock market seemed to like the news with shares in eBay jumping by 8 per cent on Tuesday in reaction to the news of the spin-off.

Photo credit: Kārlis Dambrāns, Flickr

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