PayPal, the payment company that eBay acquired in July 2002 for $1.5 billion, after 13 years of staying in the contract, has now split from its parent company. There was speculation that PayPal would be worth a bit more following the split but the actual increase in the company’s valuation came as a shock to most.
On its first day of trading, shares opened at $41.63, 8.3 percent above Friday’s last temporary closing price before its public introduction.
The company is now worth 33 times its last public valuation, which is a result of tons of transactions through it, exceeding 18 billion in numbers and worth over $1 trillion. It currently holds 165 million consumers in 200 countries.
The given shares price of $41.63 in the company results in a strong $50.8 billion which is 32 percent more than eBay’s current intraday valuation of $34.5 billion. Even after a small market correction, shares are still up by 4.74 percent which is $40.21 after NASDAQ’s opening bell.
The split will result in more freedom for PayPal to raise additional capital and acquire other companies. Shareholders clearly demonstrate that they want to hold shares in PayPal, not eBay, as it is no longer an eBay subsidiary. Also, PayPal executives can now issue bonds without going through eBay. It can also acquire companies using PayPal stock, and more.
Sure, the company will now face stiff competition from the likes of Alibaba’s Alipay, and newcomers, such as Stripe, but the now full-fledged finance company will perhaps be more efficient and more at ease to tackle and fend off such competition.