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eBay and PayPal Breaking Up

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Ebay and PayPal are finally breaking up, eBay had announced on Tuesday morning. PayPal has been growing as a business on its own over the last couple of years outpacing eBay. Over the past 12 months, PayPal has earned 7.2 billion dollars following behind eBay which has earned 9.9 billion dollars in the same amount of time. The online marketplace is set to start its own spin off version of its current payment business by the end of this year. Carl Icahn has stated in the past, “PayPal is a jewel and eBay is covering up its value.” As it would seem since the announcement of the companies splitting up, the value of them both will now be seen in their amount of profit and success.

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Carl Icahn cheered at the move between the two companies splitting up. He stated on Tuesday night: “We are happy that eBay’s board and management have acted responsibly concerning the separation – perhaps a little later than they should have, but earlier than we expected.” However Icahn suggested that next step that PayPal should take is to look for another online service in which they can merge. Icahn’s remarks were rather stern as he believes that the industry is ready for massive consolidations and mergers of varying companies. He continued, “In light of the development of strong competition such as the advent of Apple Pay, the sooner these consolidations take place, the better.” Icahn had been vocalizing his desire for awhile, hoping that eBay and PayPal would go their separate ways; when the companies announced that they were going in different directions, Icahn was elated to say the least as he had been pressuring the companies to make the move sooner. Even Tesla’s Elon Musk has been quoted in saying that “It doesn’t make sense that a global payment system is a subsidiary of an auction website – it’s as if Target owned Visa or something.” Many have wondered the same, and if left to its own devices could the company become one of the largest financial companies in the world?


PayPal has been growing rather quickly over the last year than in prior years. The business will soon be headed up by the former American Express executive, Dan Schulman who got on board with the company earlier this year. The current CEO John Donahoe and CFO Bob Swan will both be serving on one or both of the post breakup companies that will come into play after the companies split up. In the last 12 months, the transaction volume for PayPal is roughly double that of eBay. PayPal is at 26% whereas eBay is at 13% when it comes to the amount of transaction volume. Right now PayPal’s stock worth is roughly 30 dollars per share. The potential for the worth of the share prices are likely to rise higher once the company is no longer a part of eBay. Mark May who is an analyst for Citi has suggested that PayPal minus eBay could warrant even higher returns or multiple returns for faster growth. May feels that the separation could give off more of a “re-invigorating” sentiment which could help grow the business even farther which would give the company a new face. While there are some concerns that the payment service might not be able to increase business once it severs its ties with eBay, many of the industry analysts are downplaying this theory. The main focus seems to be that the company which is already outperforming eBay will only do better once it sheds the weight of its main source of transactions despite the introduction of Apple Pay in the market.

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Ebay’s board members as well as Carl Icahn feel that the breakup with PayPal is the best thing for the company to do despite their long history together. Shares of the company became stagnant ahead of the news of the breakup between the two companies on Tuesday rose 11 percent when the pre-market trading continued. Within an hour of trading the company’s shares rose 6.7 percent which thrust the company into positive trading for the first time in a year, as the share price closed at 56.19 dollars by the end of trading.

The fates of PayPal and eBay which were once combined will now be put to the test in the coming future. While eBay’s might have been the breadwinner in the past for the two companies, it is now time for PayPal to branch out on its own and see what the world has to offer. There is both industry and market elation over the split up as Wall Street investors and consumers alike eagerly await both companies net moves to see how profitable either becomes without the other.


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