Shakespeare wrote "parting is such sweet sorrow," which is mostly true, but could probably be safely amended with "...but $5 billion will cushion the blow some."
And it is just such a cushion that eBay will be handing off to PayPal when the payments branch of the e-commerce platform spins out via an IPO planned for later this year or sometime in 2016.
The soon-to-be-independent payments department at eBay will need the funds to ensure that the transition to a stand-alone business goes smoothly, according to what eBay Chief Financial Officer Bob Swan said at the Goldman Sachs Technology and Internet Conference yesterday (February 11). He further noted the money would “more likely than not” be parked offshore.
With that large payout, it seems that PayPal will be taking much of eBay's cash with it. In 2014 eBay was holding $6.3 billion in cash and cash equivalents. Moreover, it seems odd to send PayPal out the door with so much cash in hand, given that the payment business's 19 percent revenue growth in 2014 more than tripled the growth of eBay’s core marketplace business.
Swan also described a new eBay marketplace that would be "smaller" and "more-focused" under incoming CEO Devin Wenig.
Specifically, instead of the catch-all marketplace trying for both high and low end customers, Swan said eBay 2.0 will be focused on customers looking for "great deals."
Wenig, for his part, expanded on that, noting that he is looking to customers with “more time than money.”
The new direction may have put eBay out of competition with high end retailers, but it seems also to have put the company into more direct competition with sites like Overstock.com and the soon-to-be-launched Jet.com. And that competition may not be easy.
Jet announced yesterday that it was closing a $140 million funding round led by Bain. That brings the start-up's total value to around $600 million.
