eBay and PayPal will go their separate ways

The decision was made this June at the eBay annual board meeting in Half Moon Bay, California, but it was only made official recently: eBay will spin off its payment processor service PayPal into a separate company. Just as billionaire Carl C. Icahn has suggested half a year before. After months of long discussions about the state of the online commerce, the emergence of new payment methods and cardless payment systems, along with the decision of Alibaba Group to get listed at the New York Stock Exchange, CEO John J. Donahoe and his fellow directors have decided to let go of PayPal.

According to the announcement made by the company’s directors on Tuesday, PayPal will be spun off as a separate publicly traded company, letting the payment processor pursue its own strategy, while maintaining the close business ties between the two. The spinoff is set to be completed sometime in the second half of 2015. This will be the biggest change in eBay’s history of over two decades. PayPal has grown tremendously since it was acquired by the well known online marketplace in 2002, and now, after 12 years of growth, it will finally be set free.

The procedure of spinning off companies is a popular way to bolster stock values in the US today. The breakup between eBay and PayPal is the most prominent such decision this year, and it was applauded by most of its investors – the shares of the company have grown by 7.5 percent on Tuesday, to $56.63, after the announcement was made. PayPal’s “career” as an online payment processor started in 1999, launched by Confinity – a company founded in 1998 by  Max Levchin, Peter Thiel, Luke Nosek, and Ken Howery. Just months after the launch the company – and the service – was acquired by X.com founder Elon Musk, optimistic about its future success.

[ads2]

PayPal was the first dot com to IPO after the September 2001 attacks. It was acquired by eBay for $1.5 billion later that year, becoming part of the largest internet marketplace of the world (which helped it become so popular in the first place).