Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Split Could Aid Ebay, Paypal Separating Entities May Boost Values by Up to 30 Percent

Newspaper article Pittsburgh Post-Gazette (Pittsburgh, PA)

Split Could Aid Ebay, Paypal Separating Entities May Boost Values by Up to 30 Percent

Article excerpt

Instead of running auctions for artillery shells, harpoons and Zen gardening kits, a faster way for eBay Inc. to enrich its owners would be to split off PayPal.

Since John Donahoe succeeded Meg Whitman as eBay's CEO in March 2008, the world's biggest online marketplace has returned less than 2 percent to shareholders. In the same span, its rival, Amazon.com Inc., overtook eBay in equity value after more than doubling to $83 billion.

While eBay is worth $40 billion, separating PayPal -- its online payments unit that is increasing sales twice as fast -- would boost their combined value by as much as 30 percent, according to data compiled by Huntington Asset Advisors and Bloomberg. A spinoff would also let eBay finance its transformation into an online retailer more like Amazon without raising PayPal's borrowing costs, Morgan Keegan & Co. said.

"It may simply be better for PayPal to not be buried inside eBay," said Peter Sorrentino, who helps oversee $14.5 billion at Huntington, including shares of eBay.

Alan Marks, a spokesman at San Jose, Calif.-based eBay, said it has no plans to spin off the unit. He referred to a letter Mr. Donahoe sent to PayPal employees after the division's former president, Scott Thompson, announced last week that he will become Yahoo! Inc.'s CEO.

"PayPal's vision is clear," Mr. Donahoe said in the letter. "PayPal had an outstanding 2011. Our strategies are set, and we have a strong, focused leadership team in place."

Founded in 1995 by Pierre Omidyar as AuctionWeb, eBay sold its first item -- a broken laser pointer owned by Mr. Omidyar -- for $14.83. Under Ms. Whitman, who became eBay's CEO in 1998, the auction site grew into a $78 billion company by December 2004 before losing almost half its market value as more consumers turned to online retailers such as Amazon and its acquisition of Skype Technologies SA failed. …

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