According to recent rumors, Ecommerce giant eBay is looking at spinning off its own payment service, PayPal, into a standalone company.
The rumors are allegedly coming from candidates for David Marcus’ previous position of President and CEO. Some candidates have mentioned the notion of a standalone company was told to them during interviews and meetings with eBay higher-ups.
PayPal began to see immense growth back in 2001 when it was used primarily as the only way to pay for goods on eBay.com. In 2002, eBay decided to eliminate the middle man, and acquired the PayPal payment solution for $1.5 billion. Since then, the company has been said to have a faster growth rate, and is capable of expanding its business far beyond that of eBay’s.
“The EBay Inc. board and management team remain focused on maximizing shareholder value. As we discussed during proxy season and in our second-quarter financial results call, the board will continue to assess all alternatives to create that long-term value and to enhance the growth and competitive positions of both EBay and PayPal. This position has not changed,” stated a response from eBay when asked about the rumors.
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The idea of spinning of the payment service provider to act as a standalone firm has been discussed numerous times. The most high profile debate came from shareholder and board member Carl Icahn, who proposed the idea in January 2014. Although the idea was quickly thwarted by eBay CEO John Donahoe, this is not the first time the idea has come up.
Former PayPal executive Keith Rabois had been suggesting a similar idea when he was still with the company. His idea was to let PayPal be the reigning brand and have eBay act as the subsidiary. The idea would let PayPal outgrow the limitation of being a sub-company, by making eBay the side firm, with payments taking center stage.
“Change the logos, change the paint, change the T-shirts, and you get the same value basically as spinning off PayPal. Just rename the company. It’s a really simple solution. You could do it in probably 24 hours,” stated Rabois to Bloomberg.
What are your thoughts? Can PayPal outgrow eBay if it were spun off? Let us know in the comment section below.