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PayPal spun off from eBay

Activist investor Carl Icahn has got his wish after nine months of campaigning for the demerger.

Online auction site eBay and its digital payments business PayPal are to split. PayPal will be separately listed on the stockmarket. The demerger, which the board of eBay had hitherto resisted, despite heavy pressure from activist investor Carl Icahn, will be completed next year.

PayPal has boomed in the 12 years it has been part of eBay. Revenues are expanding by 20% a year, a growth rate twice as fast as the e-commerce platform's own and eBay's shares rose by almost 8% on the news.

What the commentators said

This marks "an extraordinary corporate U-turn", said Nils Pratley in The Guardian. Carl Icahn sometimes waits years for his lobbying to pay off. This time, eBay "rolled over in nine months". Icahn was right all along about PayPal being better off alone.

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At first being owned by eBay was "valuable" to PayPal, said Rob Cyran on Breakingviews.com. The online flea market offered a steady supply of customers, money and logistical support to help it flower. But "the warm embrace eventually started to smother".

These days over 70% of PayPal's payments come from outside eBay, but its close links to the group preclude potentially useful partnerships with major retailers such as Amazon.

"Unshackled", PayPal will have "strategic freedom" and an opportunity to "get back in the race". It needs to get busy. Apple has just launched a move into mobile payments and Alibaba's Alipay division is burgeoning.

The terms of the split, added Dan Gallagher in The Wall Street Journal, mean that PayPal will emerge a debt-free company expanding at double-digit rates. Meanwhile, eBay could make an enticing target for a group looking for a high-margin e-commerce division.

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