Like tea and biscuits or bread and
butter, eBay and PayPal form a combination that works so well that it’s hard to
imagine them apart. So it’s baffling to think why the online marketplace would
sell its successful payment system, until you read that rumors to that effect caused
eBay’s share price to rise by 6.6 per cent.
The speculation began back in January
when US investor Carl lcahn called for eBay to ‘spin off’ at least 20 per cent
of PayPal into a publicly listed company. lcahn claimed that eBay was failing
to capitalize on the growing popularity of mobile payments and that PayPal
would grow faster as a separate entity. He eventually dropped his proposal, but
rumors of a split have started again following reports that eBay told applicants
for the job of PayPal CEO that the payments division could be spun off as early
as next year.
Since eBay bought PayPal in 2002, for
$1.5 billion, the payment system has soared in popularity and some financial
analysts now estimate it’s actually worth more than eBay. Splitting the two
would give Pay Pal the freedom to integrate with eBay rivals such as Amazon and
continue its success in the mobile sector, which would be good news for investors
(who would hold shares in both companies). But the move would also “effectively
split [eBay’s] business in half” and eBay has previously said that its
relationship with PayPal is mutually beneficial.
We can’t see this happening, at least
until eBay’s profits plummet so far that it’s forced to sell. The site has put
so much effort into integrating PayPal to make sure the two services work
seamlessly that we can’t see them breaking the bond just yet. Mind you, that
doesn’t account for greedy shareholders who want to double their investments.
