It seems like a man we’ll be hearing more of this year in relation to eBay and PayPal is one Carl Icahn, an activist investor, who has previously thrown his weight around with Apple and Dell.
He’s now fixating on eBay Inc.. It’s reported that he has recently acquired at least 0.82% of eBay shares but some people say his holdings in the firm are more like 2%. That would make him a significant individual stockholder in eBay. He has also recently nominated two people to join the eBay board.
Icahn has an idea. Basically, he believes that PayPal should be spun off from eBay and become an independent company once more.
It strikes me as massively unlikely that he will succeed and it also doesn’t seem to be an attractive move. The union of eBay and PayPal has proved to be highly successful and it has also greased the wheels of ecommerce growth.
Separation would inevitably cause friction and make future integrations and developments more tricky. PayPal is, also, a huge profit area for eBay Inc. and it would be bizarre to let it go.
So what’s Icahn up to? Making more money. If PayPal were spun off he’d be a major owner of both PayPal Inc. and eBay Inc. and I imagine his calculation is that they will be worth more that way. Cha-ching.
We’ll see how this one pans out over the course of the year.
4 Responses
I’m amazed it took so long. I’m guessing they are doing it voluntarily before they are compelled to by regulators.
When paypal was just ebays payment platform that was fine but as paypal is now effectively a payment method like visa/mastercard/american express there are serious questions over conflicts of interest.
Ebay have strict rules on sellers encouraging outside sales and yet many sellers clearly use paypal email address data to mail shot for direct business.
It stands to reason that ebay could be accused by some of access/misuse of the data they receive from paypal for their own punitive actions against their sellers. It could also work the other way in that 3rd party websites who offer paypal as a payment method (as it is now ubiquitous) could unwittingly be giving sales data and trends to ebay via their payment company.
Without paypal propping up ebays balance sheets this marks the turning point in ebay bizarrely reporting ever rising profits whilst their sellers unanimously report tail spin proportion nosediving sales and evaporating traffic.
When the paypal income goes, and ebay stands alone on its own retail performance I predict mass panic in the markets of the kind that hit HMV, Woolworths and similar UK large businesses.
But the eBay-PayPal alliance has always been an ‘unholy’ one imo. Granted, eBay have the power to recover money from PayPal on behalf of disgruntled buyers, and thereby increase buyer confidence, but from the seller’s point of view this always generates insecurity. You never know when eBay/PayPal may step in unilaterally and unregulatedly ( ! ) to steal your money.
I realise that they could decide to force sellers to pay buyers back anyway, and that PayPal makes it ‘easier’ and more seamless to do this, but surely the control of the funds should be in the hands of the seller, not eBay. Basically they can help themselves to my money whenever they like.
For this reason, I allow PayPal access to my bank account just once per month, when I take out my money to pay my bills and bank my profits. Once that deal is done, I remove my bank account from PayPal once again. Notice how the permission to transfer funds from PP to my bank account automatically includes a Direct Debit ‘agreement’ so that they can leech funds from my account whenever they want…..why should we not have a ‘Withdraw Only’ option? Even the way they default to taking money from your bank account (after PayPal balance) rather than credit card, is a sneaky way of making yet more money from us – they don’t have to pay the credit card fees, but the seller still has to pay his fees – the whole thing is plain crazy. If PayPal wasn’t an essential part of trading on eBay, I would not use them at all. I believe I’m taking a risk using them even so. I do not feel that my money is safe with them!
I think its unlikely that Paypal and Ebay will split. What I can see happening is the requirement for Paypal to be offered on each Ebay listing being dropped.
Yes I also feel it is very unlikely and personally I would prefer for them to split. Icahn seems to get his way often though.