Ebay buys PayPal

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  • Andrew Pratt
    Moderator Emeritus
    • Aug 2000
    • 16507

    Ebay buys PayPal

    SAN JOSE, Calif. (AP) -- Online auction giant eBay Inc. said Monday it is buying electronic payment facilitator PayPal Inc. for $1.5 billion in stock in a long-rumored deal that the companies hope will make Internet trading faster, easier and safer.

    Separately, eBay released second-quarter earnings early, posting results that beat Wall Street expectations. EBay's net profit more than doubled to $54.3 million, or 19 cents per share, on revenue of $266 million, in the quarter ended June 30. Wall Street analysts had been expecting 17 cents a share, according to Thomson Financial/First Call.

    Mountain View, Calif.-based PayPal essentially lets buyers and sellers exchange money via e-mail. Buyers make payments online through credit cards and bank accounts, and PayPal relays the funds to sellers' accounts, taking a fee based on the amount transferred.

    The company says it facilitated about $1.6 billion in money transfers in the most recent quarter. About 60 per cent of its business comes from eBay users.

    Though PayPal began with just 24 experimental users in October 1999, it has quickly become profitable and now boasts more than 15.4 million accounts. Like eBay, it is a rare Internet-based business success. Although regulators in some states had questioned whether PayPal might need to be licensed as a bank -- a potentially worrisome prospect for PayPal's growth -- the company had one of this year's best initial public offerings, with its stock rising 55 per cent on its first day of trading, in February.

    EBay has its own similar service, eBay Payments by Billpoint, but it hasn't proved as popular as PayPal; more eBay sellers accept funds through PayPal than through Billpoint.

    EBay's chief executive, Meg Whitman, said the deal should make eBay "an even more compelling trading platform" because PayPal will be simpler to access, speeding up transactions and in turn increasing the sheer volume of goods and services sold on the site. The companies also will share insights on detecting fraud, she added.

    "It brings together two companies in a way that will benefit our users," Whitman told financial analysts in a conference call before the stock market opened Monday.

    San Jose-based eBay hopes to close the acquisition by the end of the year if regulators and shareholders approve, and then phase out Billpoint. PayPal would remain a distinct brand and be headed by current CEO and co-founder Peter Thiel, who would report to Whitman.

    The deal calls for PayPal shares to be converted into 0.39 shares of eBay, which at Friday's closing prices values PayPal at $1.5 billion.

    That would give PayPal shareholders $23.61 of eBay stock for each PayPal share, based on eBay's closing price of $60.55 on Friday on the Nasdaq Stock Market. That is an 18.1 per cent premium over PayPal's closing price of $20 a share Friday.

    Despite releasing the essentials of its second-quarter earnings, eBay still plans a full report on July 18. PayPal's results are due July 24.

  • Mats
    Special Member
    • Jun 2000
    • 1326

    Interresting coalition, but not too strange... In a sence these two might work pretty good togeather

    Mats Strömberg
    Ah! It's a profit deal! Takes the pressure off! Get your weight guessed right here! Only a buck! Actual live weight guessing! Take a chance and win some crap!
    Navin R Johnson (alias Steve Martin)


    • Lex
      Moderator Emeritus
      • Apr 2001
      • 27461

      These two already work together quite well every day. Ebay just increased the % they make on each sale, of course, with monthly payments of about a million I guess, lol. 8O

      Interesting deal, and a lot bigger than I would have expected, truthfully.

      "I'm out there Jerry, and I'm loving every minute of it!" - Kramer


      • Burke Strickland
        • Sep 2001
        • 3161

        Interesting deal, and a lot bigger than I would have expected, truthfully.
        Reminds me of the financing heyday of "dot coms" -- a billion here, a billion there, pretty soon we're talking big money -- but then again, these are two of the few that actually made it beyond hope and hype to actual profitability...


        What you DON'T say may be held against you...


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