 |
|
|||||||
|
||||||||
By
Online auctioneer eBay (Nasdaq: EBAY) finally put an end to months of rumors and speculation today by announcing it will acquire PayPal (Nasdaq: PYPL) for about $1.5 billion in an all-stock transaction. That represents an 18% premium for PayPal shareholders over Friday's closing price. Excluding one-time charges related to the acquisition, the deal will be immediately accretive to eBay's earnings. PayPal has been a thorn in eBay's side since it debuted in late 1999. The company allows buyers to make payments electronically, thereby eliminating the need for an auction winner to send a check or money order to the seller. That was great news for eBay, of course, because it made auctions more user-friendly. But at the same time eBay always chafed at seeing another company making money on its own site. Thus, it started up Billpoint to compete with PayPal, but even with the full force of eBay's marketing machine behind it, users never embraced it. Billpoint will be phased out once the PayPal transaction closes. eBay CEO Meg Whitman says PayPal will continue to operate as a separate brand, with chief executive Peter Thiel staying put. That decision makes sense as about 40% of its revenue comes from non-eBay transactions, something that represents "a potential new audience" according to Whitman. It also eases the mind of some eBay sellers on our discussion boards, who are hoping management leaves well enough alone. Whitman and company will make one significant change, however. Part of PayPal's non-eBay revenue comes from transactions on online gaming sites. That's always been a sore spot for some PayPal critics who worry about fraud and identity theft. But eBay, citing "the uncertain regulatory environment surrounding online gaming," says it will phase out that part of the business. Some of us here at Fool HQ are pretty angry about the timing of this purchase. This comes a mere four months following PayPal's initial public offering, in which the company was priced at $13. How is it possible that in that time the company would increase in intrinsic value by more than 75%? The answer is it can't, and once again a company has used an IPO to enrich its insiders and the investment bankers and their choice clients at the expense of general shareholders. An IPO is supposed to raise capital for the company. A mispriced, or underpriced IPO, pushes millions of dollars that should have been in company coffers into the pockets of others. Given that several insiders sold millions' worth of PayPal stock in the past weeks, this solidifies such an impression -- this IPO effectively hosed shareholders who bought the company on the open market. For this the dissenters among us are saying "good riddance." In conjunction with the PayPal announcement, eBay also released a sneak preview of its second-quarter earnings report, due out July 18. Revenue totaled $266 million for the period, and net income came in at $54 million, or $0.19 a share. That's more than double the profit from the same period last year, and a couple of pennies better than the consensus estimate.
RSS Headlines
Fool UK
