Despite spending most of 2014 vehemently denying this, PayPal is to be spun off from online auction site eBay, to become a separate publicly traded company. The spin-off is to take place in the second half of 2015. The company will split PayPal away from its embattled auction site, and as a result of the restructuring eBay’s current CEO and CFO will step down from their roles.
Dan Schulman, currently an executive at American Express, will become CEO of the new PayPal in 2015. Pre-market shares in eBay surged by 11% on news of the announcement on Tuesday. The board of eBay said a decision had been made to separate as a strategic move to help maximise growth and shareholder value for both the payment and retail entities.
“Ebay and PayPal are two great businesses with leading global positions in commerce and payments, for more than a decade eBay and PayPal have mutually benefited from being part of one company, creating substantial shareholder value.” eBay president and CEO John Donahoe said.
“However, a thorough strategic review with our board shows that keeping eBay and PayPal together beyond 2015 clearly becomes less advantageous to each business strategically and competitively. The industry landscape is changing, and each business faces different competitive opportunities and challenges.”
eBay has had a troubled year, with activist investor Carl Icahn pressuring the company to separate its growing online payments service away from its core business. Although eBay won a proxy battle to prevent that from happening, it’s now decided to do so of its own volition. The split is expected to complete by the middle of 2015, allowing PayPal and eBay to operate at “arm’s length” from each another, and hopefully helping PayPal to expand its payment offerings.
Mobile payment technology is becoming an ultra-competitive sector and Apple recently announced an entry into the domain. PayPal is currently available in 203 markets worldwide and expects to process one billion mobile payments this year.