eBay Says Yes To Activist Investor: PayPal Split On The Cards
eBay Says Yes To Activist Investor: PayPal Split On The Cards
This corporate divorce has been talked about for many months. Even as Amazon attracts the sellers, eBay is going to spin off PayPal into a separate company following the advice of activist investor Carl Icahn. This is seen as the best choice for the core e-commerce business of eBay by many. But the group has a lot to prove even as it is headed for a split. The move to spin off PayPal payment service into a separate firm comes on the heels of Icahn's advice urging the same for some time now.
Online auction house and e-commerce group eBay made the announcement regarding the PayPal split on Tuesday, 30th September 2014 according to a Reuters report. Reuters also indicated this move aimed at ensuring both companies operate more effectively and efficiently in fields that are their respective strongholds. However, eBay is under scrutiny as well as the 19 year old company struggles to cope with the massive challenges Amazon has thrown its way.
Many analysts are predicting that the separation of PayPal from its parent company may not be such a bad idea, after all. Reuters has indicated that this may be the way for eBay to “regain its footing and find ways to grow its business.” The online auction house and shopping company earned sales of $7.69 billion in 2013, $6.93 billion more than 2012.
Meanwhile, the co-founder of eBay says the spinoff is a “natural” point in the progression of the company. Influential investor billionaire Carl Icahn is also in favor of the spinoff and eBay management is less likely to have issues with the investor on this score. Icahn has been quoted by the media as saying, "It is almost a 'no brainer' that these companies should be separated to increase the value of these great assets and thus to meaningfully enhance value for all shareholders," he said in a blog post. "It also continues to be my belief that the payments industry, of which PayPal is an important part, must be consolidated - either through acquisitions made by PayPal or a merger between PayPal and another strong player in the industry."
Interest and speculation are now rife as to how the rapidly growing PayPal will fare as a company on its own. Currently, Reuters has reported how the payments industry is making a rapid transition into the mobile services and several companies have increased involvement and investment in mobile payments. PayPal will also have Apple Pay for its rival.
Mobile shopping too has exploded with the advent of Ali Baba and Amazon. Either which way, eBay will have its hands full given the rife competition and the ever growing number of competitors. Maintaining market share will be the main challenge for this online shopping company as it separates from its cash cow, PayPal.
