3 February 2023

EBay to Spin Off PayPal Business

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EBay Inc. said it plans to spin off its PayPal business into a separate publicly traded company next year, taking a page from the playbook of activist investor Carl Icahn, who had pushed for the company to split. The decision marks a sharp reversal for a company that spent a lot of time, energy and money earlier this year fighting Mr. Icahn and the premise that eBay would be better as two. It comes as Mr. Icahn has taken a bigger role within the company and as eBay faces fresh competition in the payments sector from Apple Inc., which unveiled this month a new mobile-payment service it hopes will shake up the industry.

Current eBay CEO John Donahoe and finance Chief Bob Swan will oversee the separation of the business and may join the boards of the companies. Devin Wenig, the current president of eBay Marketplaces, will be the chief executive of the new eBay, while American Express Co. executive Dan Schulman will lead the new PayPal. Mr. Schulman will immediately take over as president of PayPal.

PayPal has been on pace to overtake eBay's core marketplace by sales. In the June quarter, the payments unit boosted sales 20% to $1.95 billion and added 4.1 million new active customers from the first quarter, to 152.5 million. PayPal facilitates one in every six dollars spent online, eBay said. At its namesake marketplace, revenue rose 9% to $2.17 billion as the number of active accounts increased by 3.8 million to 148.9 million.

EBay argued Tuesday that splitting up puts both eBay and PayPal in better competitive positions, allowing each to focus more keenly on strategy. Mr. Donahoe said on a call with analysts that eBay transactions represent less than 30% of PayPal's current total volume, while the company estimates it will fall to less than 15% in three years.

Mr. Donahoe and the company's board had said earlier this year that they believed the company would be stronger with PayPal in the fold. They were responding to a push to split off the payments business from Mr. Icahn, who eventually backed off his demands and agreed to insider status and an adviser role with eBay.

His firm is eBay's sixth-largest shareholder with about a 2.5% stake, according to FactSet, and he also has a stake of less than 1% in Apple. Talk of a spinoff at eBay didn't end after Mr. Icahn's shift, however. Shares jumped in August on reports said the company was discussing a possible split, two months after then-PayPal President David Marcus left to join Facebook. Mr. Marcus had been one of the executives battling calls to split PayPal from eBay. The company said in June that Mr. Icahn played no role in Mr. Marcus's decision to leave eBay.

After the spinoff, PayPal and eBay said they would look to continue working together. The companies will also each record one-time charges related to the move before they split.

Click here to access the full article on The Wall Street Journal. 

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