The eBay/PayPal divorce date is set
June 29, 2015 01:29 PM
EBay Inc. and PayPal Holdings Inc. are officially breaking up.
The e-commerce giant’s board of directors on Friday approved PayPal’s separation from the eBay Inc. After July 17, PayPal and eBay will operate as two independent, publicly traded companies. PayPal will be listed on the Nasdaq stock market under the ticker “PYPL”; eBay will continue to trade on Nasdaq under the ticker “EBAY.” PayPal’s shares will begin trading on July 20.
The move is the first of two transactions that will break up eBay’s e-commerce empire. While eBay currently consists of three businesses—Marketplaces, PayPal and Enterprise, its e-commerce technology and services division—it plans to select a buyer for its Enterprise division by July 1. At that point, all that will be left is a single business: an online marketplace that accounted for roughly 49% of eBay Inc.’s $17.9 billion in revenue last year.
“As separate, independent companies, eBay, led by Devin Wenig, and PayPal, led by Dan Schulman, will each have a sharper focus and greater flexibility to pursue future success in their respective global commerce and payments markets,” says John Donahoe, eBay’s president and CEO.
As CEO, Wenig aims to turn eBay into a “discovery-based marketplace” where value-oriented shoppers stumble upon and buy items they might not have known about or thought about buying. The challenge will be bringing eBay’s growth at least up to the level of online shopping as a whole. The gross merchandise volume, or GMV, which measures the total sales dollar value for merchandise sold through eBay’s marketplace in the United States, grew only 8.5% last year. That’s far short of the U.S. e-commerce market’s 15.4% growth rate. And while eBay faced some unusual obstacles last year—a data breach forced it to reset users’ passwords and Google Inc. changed the way it ranks web sites in a way that hurt the online marketplace—the company’s growth has exceeded the U.S. e-commerce market’s growth rate only once since 2009. And while revenue for eBay’s Marketplaces and Enterprise divisions grew about 6% last year, PayPal’s jumped 19%.
As part of the separation, eBay shareholders will receive one PayPal share for every eBay share they own.
The companies will operate under a five-year agreement that guarantees PayPal a reliable source of revenue from eBay purchases, while at the same time frees both companies to form alliances with other businesses. An independent PayPal, for example, can form alliances with retailers, even Amazon.com Inc., and other financial firms. Meanwhile, eBay’s Marketplaces will be free to accept other payment forms for up to 20% of its transactions (eBay will pay PayPal a penalty if the transaction percentage dips below that threshold; PayPal will hand over cash for transactions above 80%).
Read about Devin Wenig’s plans to reshape eBay after its separation with PayPal in the June issue of Internet Retailer magazine.