Beg, Steal, or eBay (EBAY)

Beg, Steal, or eBay

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By Rick Aristotle Munarriz
November 21, 2008 | Comments (5)

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Has it really gotten that bad, eBay (Nasdaq: EBAY)? In a gutsy (if not desperate) move, eBay's PayPal will begin testing a service today that extends credit lines to some of its members.

This may seem like a lousy idea at first, but it's just eBay's latest response to the economic slowdown. The company has gone from offering eBay shoppers coupons on PayPal to recently acquiring deferred-payment specialist Bill Me Later.

Now PayPal will reach out to credit-worthy active members, giving them a chance to tap a predetermined credit line to spend through partner merchants (including eBay, of course). The carrot for potential borrowers is that PayPal will let them skate interest-free on the repayments until April. You've got to hand it to eBay for timing this perfectly, heading into this tight holiday shopping season.

Moves like this can backfire, of course. We know how investors react to companies that take on a little credit risk. Discount online broker E*Trade (Nasdaq: ETFC) is still paying the price for its banking initiatives. The worst-performing IAC (Nasdaq: IACI) spinoff has been Tree.com (Nasdaq: TREE), parent company of lender lead generator LendingTree.com.

What's next, eBay? Are pawnshops and payday advance loans in PayPal's future?

Lay off those silly thoughts for now. At least eBay is responding -- realistically -- to this dour economy. Give it some credit. It’s apparently willing to give some to you.

More items in the eBay bid basket:

The company had a bag of press releases last month.
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It's So Much Worse Than You Think .

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Longtime Fool contributor Rick Munarriz is a satisfied eBay user with 177 positive feedback ratings to show for it. He does not own shares in any of the companies in this story. He is also a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance. The Fool has a disclosure policy.

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Report this Comment On November 21, 2008, at 1:34 PM, Jdson2001 wrote:

Gutsy or desperate, Ebay wouldn't have been in this situation if they hadn't priced their sellers out of business. In their greed to grow larger and to finance expansion to China which backfired, Ebay made a ton of very bad decisions. Sellers can't leave negative feedback? Fees that have grown 50-100% in two years? Ebay didn't realise that those sellers they drove away were also their buyers so they lost twice. Ouch! As a long time ex-seller on ebay I'm very glad I never bought their stock.
Report this Comment On November 21, 2008, at 1:41 PM, BuhByeeBay wrote:

Hey, why not? We still haven't allocated the 700 billion dollar bail-out yet so let's let 'em buy now and "try" to pay later, again, aye?
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eBay is on a path of complete and total self destruction.
Report this Comment On November 21, 2008, at 1:54 PM, BuhByeeBay wrote:

At least the original BillMeLater owners were smart enough to see that offering credit these days is the worst possible idea in our economy today. So they unloaded it to the greedy-eyed eBay, who was way too possessed by their greed demons to see past another horrid deal they got themselves into, again....
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Seems a previous eBay CEO unloaded her stock, and got out just in time too!
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Oh, well.... Why not put BillMeLater on the shelf next to Skype?
Report this Comment On November 21, 2008, at 6:49 PM, DONSCYCLEWARE wrote:

Sadly eBay management has forgotten how to manage eBay. They have made eBay an increasingly hostile venue for sellers to conduct business.
It appears that eBay is using their on line auction venue and their customers; the sellers, as cash cows to finance risky spending forays.
As an eBay seller I hope the acquisition of Bill Me Later results in increased sales for me. Unfortunately I anticipate that the bottom line on this acquisition will be worse customer service and higher seller fees. It's going to be tough to pay off a billion dollar loan.
A an eBay seller I wish them the best. As an investor I'm selling them short for the next two quarters.
Don
Report this Comment On November 22, 2008, at 12:46 PM, ayamore wrote:

All I want for Christmas is for eBay to pay me a dividend!
All I want for Christmas is for eBay to pay me a dividend!
All I want for Christmas is for eBay to pay me a dividend!

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Beg, Steal, or eBay

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Follow along with the Global Gains team as they travel to key business centers in China to uncover the very best investing opportunities! Sign up here to receive their FREE dispatches from the road.

Comments from our Foolish Readers

Report this Comment On November 21, 2008, at 1:34 PM, Jdson2001 wrote:

Report this Comment On November 21, 2008, at 1:41 PM, BuhByeeBay wrote:

Report this Comment On November 21, 2008, at 1:54 PM, BuhByeeBay wrote:

Report this Comment On November 21, 2008, at 6:49 PM, DONSCYCLEWARE wrote:

Report this Comment On November 22, 2008, at 12:46 PM, ayamore wrote:

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