eBay-PayPal Split Off Rumour Caused eBay Stocks to Increase 7%

eBay may sell off PayPal. Nothing is confirmed at this moment but there is a strong speculation and eBay shares have gone up 7% after a report that eBay told some PayPal job candidates the company might be spun off. There’s also rumors that billionaire Carl Icahn will supervise the separation and gain profit.

The report says the payment arm could be separated from the owning company by early next year. The chief executive of eBay is John Donahue. He is currently the acting CEO of both PayPal and eBay. He has been the acting CEO of eBay and PayPal since the former CEO Dave Marcus joined Facebook.

PayPal was acquired by eBay in 2002 for a whopping sum of $1.5 billion. It is the trendsetter in payment gateway business and the the fastest growing unit of eBay. Analysts are expecting PayPal to soon account for half of eBay’s revenue.

Carl Icahn, the billionaire investor has long been running a campaign for spin off of PayPal. He has reportedly invested $1 billion in eBay stocks. Interestingly some business tycoons are backing Icahn. One of them is Elon Musk, the cofounder of PayPal.

eBay responded by saying the existing board of directors “has concluded that the company and its shareholders are best served by the current strategic direction of the company and does not believe that breaking up the company is the best way to maximize shareholder value.” It was heard later on that eBay and Icahn reached to a settlement and the latter dropped the suggestion of splitting off PayPal.

Over last one year, PayPal has been showing activities like acquiring a company called Braintree for $800 million and introduced a product called Venmo Touch after the acquisition of Venmo by Braintree. The product is a one-touch consumer facing payment solution.

The acquisition and new product launch gave a boost to eBay revenue. The company garnered 16.05 billion revenue in 2013. More than $6 billion of the revenue came from PayPal. After the rumor broke, eBay stocks hit an intraday high of $56.98. eBay stocks finally closed at $55.89, 4.6% up from previous day’s closing.

eBay however downplayed the impact of the report. In a statement the company said, “As we discussed during proxy season and in our Q2 financial results call, the board will continue to assess all alternatives to create that long-term value.”

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