eBay To Spin Off PayPal 76
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."
GOODBYE, eBAY! WE REMEMBER YOU! (Score:3)
Hello eBaba!
Remember when they bought and sold Skype? ;-)
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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.
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Seems like not being open to a hostile buyout would be a good thing?
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Re: lol capitalism. (Score:1)
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 cuttin
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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
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Re:lol capitalism. (Score:5, Interesting)
hence the comment in the first sentence of the summary, "too big to compete effectively".
Re:lol capitalism. (Score:5, 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.
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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?
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First, it has nothing to do with Alibaba's IPO and everything to do with Apple's new one touch payment.
How so?
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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 g
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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 t
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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.
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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.
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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 – wort
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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.
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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.
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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 hav
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So eBay would survive (Score:5, Interesting)
in the admittedly unlikely but highly desirable eventuality of PayPal going down in flames.
Re:So eBay would survive (Score:5, 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.
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eBay and Paypal are mutually beneficial. Paypal is absolutely reliant on ebay for sheer volume. It's their foundation.
But I just don't think sellers liked being cornered into having to accept PP 99% of the time.
eBay is off it's core market, chasing more lucrative opportunities. Problem is, they don't own that other market (amazon, alibaba), never will, and are pissing off their base with every new change. It's the curse of needing constant growth in our economy.
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Well, eBay and Paypal are fundamentally tied t
I am an economics nub (Score:2)
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Yes – the reason to merge is to "synergize." However, you are assume that mergers always lead to the expected benefits. This only actually happens about 1/3 of the time. About a 1/3 of the time you get "bleh". And about 1/3 of the time you get dissynergies. Not all marriages work out to be happily ever after.
Re:I am an economics nub (Score:5, Insightful)
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This is correct. The business I work for had to do the same thing. We had different divisions that had different core competencies that synergized well, but having them joined at the hip made it impossible to diversify. Customers looked at you with disdain because they thought you'd treat them like a second class citizen to your sister company. Truth was we wanted to diversify because all parts of the business were simply too reliant on the one big customer, and it made the companies worse. Separating
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Sounds reasonable. My employer, long before I hired on, did much the same thing.
They split off one part of the business as a separate company, since the one company's customers were customers of the other company. This meant that the customers of the spun-off company's competitors were at a disadvantage. Or were perceived to be.
Post-spinoff, Company S's customers wouldn't be locked in to using Company E. And customers of companies competing with Company S wouldn't feel like they were getting less atte
Then eBay can become a bank. (Score:4, Interesting)
Then eBay can become a bank. In exchange for more regulation, they get to do lending and can borrow from the Fed.
Re:Then eBay can become a bank. (Score:5, Interesting)
"Then eBay can become a bank. "
Since July 2007, PayPal has operated across the European Union as a Luxembourg-based bank.
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"Then eBay can become a bank. "
Since July 2007, PayPal has operated across the European Union as a Luxembourg-based bank.
But within the US they are not considered a bank, allowing PayPal to freeze funds of US citizens with no legal reason or ramifications. Additionally, point to make towards the OP, PayPal has owned Bill Me Later for a long time, and have been lending for years.
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I'm sure TTIP will solve any problems like that ;-)
https://en.wikipedia.org/wiki/... [wikipedia.org]
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There is a huge regulatory difference. (At least from the US perspective. I think Europe is roughly in line.)
Pay Pal is currently a "money transfer agent". That has fairly light regulatory requirements, mainly around money laundering.
If Pay Pal began offering financial services – like credit cards, then it would be treated as a real bank. This means a whole new world in terms of regulations. It also means that the Federal Reserve would not only regulate Pay Pal but would also regulate eBay as a bank h
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BillMeLater is now Pay Pal Credit. [billmelater.com] Maybe that's the direction they are heading?
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That is an exclent example to my point. BillMeLater is explicitly not a bank and does not offer loans, credit card services etc. It is a payment system. The "Bill Me Later" part is handled by a outside 3rd party - Comenity Capital Bank
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More excellent examples.
The Master Card is a example of a "branded' cards – it carries the Pay Pal's brand but issued by a unrelated 3rd party bank. It is the 3rd party bank that has to deal with the heavy regulations of being a bank. I would also guess they pick up most of the profits.
The Dollar General is an example of Pay Pal being a "money transfer agent" – which has very low regulations. So while it is a financial institution, it is not acting as a full blow "bank".
PayPal is obsolete (Score:1)
I pay everything in Dogecoins.
too big to be acquired (Score:2)
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.
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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.
What are you, some kind of Communist?
I hope the new owners (Score:2)
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address the customer service problems. I regard PayPal as unusable.
They won't. That cuts into the bottom line.
Investor(s)? (Score:1)
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.
What took so long? (Score:2)
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/... [bloomberg.com]
do as carl icahn wants (Score:2)
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.
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Taking bets (Score:2)
can someone dumb this down form me (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.
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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.
Its stock holders get an equal number of shares in the new company. So if you own 10 shares of ebay, you will now own 10 shares of ebay and 10 shares of paypal. You can then buy and sell each one independently of the other. For some companies, the whole company is greater than the sum of its parts. In this case, the powers that be (the board members), have decided that each one would be worth more on its own than bundled together.
This could be because they are interested in acquisition. It could be they
Since when do eBay and Paypal compete? (Score:1)
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They compete in the sense that eBay + PayPal is a competitor to something like Amazon which means Amazon won't let people pay via PayPal.
Split off, with PayPal on its own again, then only eBay will compete with Amazon directly, although PayPal will still compete with Amazon payments, there is a better chance Amazon will accept it, since they want to let people spend money.
And on the other side, there is no real advantage to eBay in keeping PayPal linked. It will still be a payment option just as it is now.
This could be a good thing... (Score:4, 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.
Fantastic! Bring on Paypal payments on Amazon (Score:2)
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.