eBay Inc (NASDAQ:EBAY)’s been fueling PayPal for quite a while and now the baby-company is ready to make its first steps as an independent legal entity, according to CNBC. This comes as a result to pressures from Alibaba Group Holding Ltd (NYSE:BABA)’s tech empire that might crush the smaller e-commerce company on its rise. The spin-off is meant to hedge risk for the investors that currently have a stake in eBay Inc (NASDAQ:EBAY).
The company’s trading at $52.66 per share, its price declined by some 0.5% during the last trading day and it shows a weak performance for the last two months. Also, the company’s down by about 4% year to date. Probably, in the context of future prospects, this separation seems the best opportunity to grab onto in order to succeed.
“eBay and PayPal have been better together over the last 12 years and certainly over the last 6. But, what’s changed is we’ve just come out of our annual strategic planning process, the same process that the board and I do every year, where we look forward, we look forward about how to best position the company over the next 3 to 5 years,” said John Donahoe, eBay Inc (NASDAQ:EBAY)’s CEO.
So far, PayPal has profited from a series of benefits in the form of new clients, acquisitions’ data, and free funding from its current parent business. However, this will soon not be enough for the former to thrive, which might be detrimental also to eBay Inc (NASDAQ:EBAY) eventually.
“The synergies that I talked back earlier in the year are still there, but they naturally decline over time. You know when you look forward eBay will be less than 15% of PayPal’s business three years from now and we can achieve many of the benefits of these synergies through arm’s length commercial relationships,” added John Donahoe.
PayPal’s shares will also be traded publicly and the company might get more interest from eBay Inc (NASDAQ:EBAY)’s competitors that didn’t pursue a contractual agreement due to fears that the payments system will show impartiality towards its parent company. Everything should fare well as this is not the first spin-off ever performed, not even the first in the same category.
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