eBay Inc (NASDAQ:EBAY) may be spinning off its electronic payment division, PayPal Inc., but it is not completely abandoning the company it once bought at took private.
According to a report by Dominic Chu on CNBC, investors need not worry about PayPal losing business from its former parent company once it goes independent as eBay Inc (NASDAQ:EBAY) has committed to the payments firm.
“[…] eBay and PayPal have outlined a mutually-beneficial five-year plan ahead of the upcoming spinoff of the electronic payment division PayPal. The two firms have agreed that after the split, eBay will not reduce the volume of transactions it channels through PayPal for the next half decade while it continues to push for better rates for merchants who use the pay service. The bottom line, eBay promises to channel 80% of its online sales through an independent, separately-traded PayPal just as it does right now,” Chu reports.
EBay Inc (NASDAQ:EBAY) is spinning off its PayPal division later this year after continued pressure mainly from activist investor Carl Icahn who has been insisting that the online commerce company will be unlocking more value for investors if it spins off PayPal.
PayPal, Inc. was a publicly traded company headed by Peter Thiel up until eBay Inc (NASDAQ:EBAY) agreed to purchase the firm for $1.5 billion in 2002. The online commerce giant said then that the acquisition was strategic as the companies had “complementary missions”. Meg Whitman, current chairwoman, president and chief executive officer of ailing Hewlett-Packard Company (NYSE:HPQ) and President CEO of eBay when the acquisition was made, said then that the acquisition is to improve the experience of users of the online trading platform.
Carl Icahn’s Icahn Capital LP owned over 46 million eBay Inc (NASDAQ:EBAY) shares by the end of 2014. The firm was eBay Inc.’s largest institutional investor by the end of the said year. Another investor with a large position in the firm is Dan Loeb’s Third Point which increased its stake 123% quarter over quarter by the end of the December 2014 quarter to 10 million shares.
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