The old activist push against eBay Inc. (NASDAQ: EBAY) to spin out PayPal is now even closer to taking form. In 2014, eBay decided to separate the PayPal and eBay units into two separate entities. A new SEC filing shows more detail on the terms and conditions of this split-up. Make no mistake here, the companies are going to keep some efforts together. Still, the terms are being partially shown for what to expect in the years ahead.
24/7 Wall St. has taken some of the guts of the filing to show some of the terms of the PayPal and eBay separation and agreements together ahead. We also showed some of the old 2002 terms to reveal how much growth there has been. Needless to say, it has been exponential growth.
What is interesting here is that PayPal still has not yet decided (or determined) if they will list on either the Nasdaq or New York Stock Exchange. PayPal has also yet to pick a ticker. As a reminder, PayPal used to be its own public company before eBay acquired it. Its old stock ticker was PYPL. Will we see that stock ticker return?
PayPal’s financials showed that the total payment volume in 2014 (TPV) was approximately $235 billion. That represents growth of 26% over 2013. At the same time, payment transactions were approximately 4.0 billion, representing growth of 22% from the previous year.
Speaking of the old 2002 merger agreement, here is what eBay said about its acquisition of PayPal at the time:
A natural extension of eBay’s trading platform, the acquisition supports the company’s mission to create an efficient global online marketplace. Payment is a vital function in trading on eBay and integrating PayPal’s functionality into the eBay platform will fundamentally strengthen the user experience and allow buyers and sellers to trade with greater ease, speed and safety.
Based on eBay’s stock price on July 5, 2002, the acquisition was being valued at a mere $1.5 billion — based on the deal being for 0.39 shares of eBay for every share of PayPal in 2002. Now, fast forward to 2015 and the value is exponentially higher:
- Second quarter of 2002: The guidance for the period, 13 years ago, showed that PayPal’s estimate revenue would be between $53 million and $54 million for the quarter, and eBay’s second-quarter guidance was for revenues to be $266 million in revenues.
- Fiscal 2014: eBay (with PayPal and eBay combined) reported a total of $17.9 billion in revenue and $3.51 billion in operating income. The PayPal filing showed that its pro forma annual revenues were $8.01 billion with operating income of $1.22 billion.
Again, there has been exponential growth going back to the 2002 deal announcement, when eBay acquired PayPal.
According to the PayPal filing from Thursday:
In 2014, approximately 162 million active customer accounts processed payments on our platform. Total payment volume over the last 12 months increased by 26% to $235 billion, as more consumers and merchants trusted PayPal to pay and get paid. We have significant global reach, processing transactions in more than 200 markets, allowing our customers to receive payments in more than 100 currencies, withdraw funds to their bank accounts in 57 currencies and hold balances in their PayPal accounts in 26 currencies. We are a leader in mobile payments and processed nearly 1 billion mobile transactions in 2014 for our customers.
If you go back to 2002, roughly 60% of PayPal’s business was shown to be on eBay, and the remaining 40% was from small merchants. eBay’s community at the time was 46 million users worldwide. eBay had previously acquired Billpoint long before its acquisition of PayPal, and then it was to phase out Billpoint as part of the PayPal deal.
24/7 Wall St. has taken much more detail direct from the PayPal filing to show the terms of the operating agreement. We also included details about the non-compete agreement, joint product development, data sharing and the term and termination to show how long the companies would be tied up with each other to keep eBay’s operations seamless.
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