Parent company eBay will turn PayPal into a separate business entity by next week. Investors will then decide if they would buy stocks of e-Bay, PayPal or both.
CNBC reported that PayPal was first bought by eBay 13 years ago. From 2012 to 2014, the parent company suffered continuing declines in its profit. Last year, revenue was only up by more than 6 pecent.
PayPal, on the on the other hand, turned out to be much more profitable. Almost 50 percent of eBay's profit in 2014 can be attributed to its online payment division. PayPal's income showed a 19 percent improvement in 2014. The payment service also bought Xoom and Braintree.
The separation will occur on Friday, July 17, and on Monday, Nasdaq will allow PayPal to trade on its own name, PYPL.
For every one stock of eBay that an investor owns, it will entitle him or her to one PayPal stock. The value of eBay is estimated to be around $30 billion, while PayPal's value is almost $45 billion.
Goldman Sachs recommended a few days ago that PayPal's stock is worth buying into. The company also added that a $48 price per PayPal's share is an ideal price for investors, according to The Street. Brokers believe that PayPal can still get bigger since its services are only 1 percent of the total payments made on the internet. Experts estimate that around $34 trillion is paid via online services every year.
Meanwhile, eBay is selling its GSI commerce division which offers its services to vendors who want to improve their sales and presence online. Then, eBay explained that the said division no longer has a place in its current corporate strategy. However, the parent company may have been disappointed by the unit's dismal level of profitability as it had lost a number of clients through the years, according to The Street.
