How PayPal's Spinoff Could Spell a Tide Shift for the Mobile Payments Industry
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Today, in a sudden about-face, eBay announced it would spin its PayPal subsidiary into a publicly-traded company -- a move that could portend a tide shift for the mobile payments industry.
As Apple wages to upend mobile payment paradigms with Apple Pay -- in a dynamic industry that already includes Google Wallet, Square, Stripe, Alibaba’s Alipay, a forthcoming credit-card reader by Amazon and more -- PayPal’s newfound independence could likely spell an acquisition or hiring spree.
When the company goes public, for instance, it will possess stock options on top of cash with which to tender potential acquisitions. PayPal, which today generates roughly half of eBay’s revenues, could therefore scoop up competing startups like Square or Stripe -- as it has been rumored.
Related: Rumors Swirl That Square Is for Sale
A self-governing company (as well as newfound stock options) could also serve to attract top-tier talent, notes Recode -- particularly executives who might have been wary of PayPal’s subsidiary standing.
“PayPal rarely ranks at the top of wish lists that top talent wants to work for, despite generating $6.6 billion in revenue last year and growing at a rate of 20 percent annually,” according to Recode. “Part of the reason for that is that after 12 years as an eBay subsidiary, PayPal is no longer seen as an innovator.”
PayPal has tapped former American Express exec Daniel Schulman as its new CEO, while eBay’s chief executive, John Donahoe, will be replaced by his colleague Devin Wenig after the spinoff, which is slated for late next year.
Ultimately, while eBay’s acquisition of PayPal in 2002 aimed to spawn symbiosis by bringing marketplace and payments processing under one roof, the companies now hope a spinoff will enable each to hone a tighter focus.
“For more than a decade, eBay and PayPal have mutually benefited from being part of one company, creating substantial shareholder value," Donahoe said in a statement. "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."
And Wall Street seems to be welcoming the news. Ebay shares rose as much as 8 percent this morning after the announcement.