Boredom is probably one of the best catalysts to inspiration and creativity. Now, when companies are struck by a stagnant environment, they usually try to improvise as efficiently as possible. eBay Inc (NASDAQ:EBAY) delayed the PayPal split up to the point where nothing else could be done to get some growth for its current $51.86 price. Bloomberg’s special guests Raymond James Vice Chairman Fred Lane and Nuveen Asset Management Chief Equity Strategist Bob Doll argued why these break-up strategies are pursued en masse.
“Low nominal GDP means ‘I’m struggling to grow’ and if I’m a CEO or if I’m the board I have to be creative. I may go buy a company to try to make it happen or split my company up,” said Bob Doll.
eBay Inc (NASDAQ:EBAY) is just the most renewed company that is going to pursue a division of businesses, but when one looks at data regarding all the upcoming spin-offs, he or she can see that there are about 3 just in the following two to three weeks. Sometimes management is seeking to maximize its income through a split or it just does so because the board pushed such a decision, or there’s an activist investor, like Carl Icahn in eBay Inc (NASDAQ:EBAY)’s case, that is looking for higher stock price for its long positions. Whichever may be the case, if applicable, a spin-off can assure a higher cumulative value for the company.
“We’re talking about disparate value. We’re talking about here’s a company and it’s growing at 8% or 7% and it has a big enough to be a stand-alone public company within it that’s growing at 18% […] So, some of these spin-off make more sense, some make less sense but some are absolutely compelling,” explained Fred Lane.
eBay Inc (NASDAQ:EBAY) had to take some actions as the company’s down almost 6% year to date, so freeing up PayPal can prove to be a brilliant move. However, it’s not so clear what will become of core eBay Inc (NASDAQ:EBAY) after the procedure as it appears to be in a less favorable position compared to its daughter company.
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