Mobile Commerce

Western Union Stock Drops On News Of PayPal’s Xoom Deal

Yesterday (July 2), the day after PayPal’s plans to acquire Xoom were announced, Western Union’s stock took nearly a seven percent hit.

That news, of course, revealed that PayPal would buy the international money transfer provider for $890 million in an all cash deal. As a major competitor to Western Union, taking on its online C2C transactions, Xoom’s shares surged more than 22 percent on July 1 after the news broke.

A Seeking Alpha article points out that Western Union’s stock dip, which ended the day down seven percent, was the lowest for the company since mid-February. That same article points to the fact that Western Union has the budget to counter PayPal, but that eBay would likely be able to step in and win any bid.

As for eBay’s stock, it was trading up nearly 2.4 percent the day after PayPal made the announcement and was followed by positive reactions on the Street. PayPal and eBay are just 17 days away from the big split when PayPal becomes its own publicly traded company as PYPL.

“Both PayPal and Xoom have competitive advantages from fraud-detection technology underlying their respective products. While Xoom’s engine was initially built using concepts borrowed from PayPal, they have since extended the functionality to peer-to-peer international remittance,” Baird’s Colin Sebastian told Seeking Alpha.

“Despite a fairly rich valuation, Xoom is growing quickly and brings to the table a scalable, bolt-on platform to help offer additional value-add,” Keefe, Bruyette & Woods’ Sanjay Sakhrani told the publication.

Xoom’s “anytime, anywhere” money transfer platform enables U.S. consumers to send money to friends and family in 37 different “receive” countries and pay bills via mobile phones, tablets and computers. Xoom’s proprietary “funds-out” network will allow PayPal to build out a key part of its consumer value proposition — digital money transfer and management. PayPal currently has 68 million active users in the U.S.

Cross-selling Xoom’s capabilities will expand the set of offerings that PayPal’s existing user base in the U.S. can leverage, not to mention fast track its ability to enable global money transfer in attractive “receive” markets such as Mexico, India, the Philippines, China and Brazil. The acquisition could also help both PayPal and Xoom create the scale and integrated product set that supports the development of new business models for how money is moved digitally between consumers, businesses and merchants.

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