Tuesday 25 October 2016

PayPal valued at $50bn in stock market debut following eBay split

Sophie Curtis

Published 21/07/2015 | 10:39

PayPal is splitting from EBay Inc. and will become a separate and publicly traded company during the second half of 2015
PayPal is splitting from EBay Inc. and will become a separate and publicly traded company during the second half of 2015

PayPal has completed its separation from eBay, after the digital payment service made its stock debut with a higher market value than its parent company.

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PayPal, which has 169m users and processed 4bn payments in 2014, started trading on Nasdaq under the ticker symbol PYPL on Monday, with a market capitalisation of $50.8bn (£32.6bn).

Shares had risen 5.9 percent in premarket trading, from $38.35 on Friday evening to $40.62 on Monday morning. The opening share price was $41.63, but has since fallen back to $40.89.

Meanwhile, eBay’s value shrunk to roughly $34bn following the spinoff. The company recently annouced that it plans to sell its enterprise business, leaving it with only its marketplace business.

“Investors have been waiting to invest in PayPal for a long time, even before the split was announced,” Gil Luria, analyst at Wedbush Securities in Los Angeles, told Bloomberg ahead of the float.

“We’re finally at a point where you can only own PayPal with its market-leading position and growth rate.”

PayPal, founded in 1998, previously listed on the Nasdaq before it was acquired by eBay in 2002 for $1.5bn. It now operates in 203 markets, allowing customers to withdraw funds to their bank accounts in 57 currencies.

eBay announced its intention to spin off PayPal in September 2014, amid pressure from activist investor Carl Icahn, who has a 2.5pc stake in eBay.

PayPal's revenues were increasing at around twice the rate of eBay at the time, and Mr Icahn argued that PayPal was a “jewel”, whose value was being “covered up” by its parent company.

The company's president and chief executive, Dan Schulman, claims that PayPal is well-positioned to deliver the benefits of digital money to people around the world.

“Mobile technology is transforming payments, making it easier, safer and more affordable for people to move and manage their money than ever before," he said.

"As an independent company, we see a tremendous opportunity for PayPal to expand our role as a champion for consumers and partner to merchants, and to help shape the industry as money becomes digital at an increasingly rapid pace.”

However, PayPal will have to compete with the likes of Apple Pay, which launched in the UK last week, if it wants to win in mobile payments. The company believes that its ability to work across different devices and its expertise in risk management give it an advantage.

"There will probably be more changes in digital payments over the next five years than there have been in the last 50, so the timing is right for PayPal to go it alone as a stadalone company," said Cameron McLean, managing director of PayPal UK.

"We've really worked hard on our mobile experiences. It's obviously a very fast-growing space, and we welcome comptition. For us though, to win in payments, it's about providing a trusted platform. We try to be platform agnostic, whereas Apple Pay is very focused on their own ecosystem."


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