PayPal co-founder Elon Musk wants to see the company he sold to eBay Inc (NASDAQ:EBAY) go solo once again, because he thinks the auction site that owns it is holding it back from real growth. “It doesn’t make sense that a global payment system is a subsidiary of an auction website. It’s as if Target Corporation (NYSE:TGT) owned Visa Inc (NYSE:V) or something,” said Musk, reports Steven Bertoni for Forbes. “[PayPal] will get cut to pieces by Amazon Payments, or by others like Apple Inc. (NASDAQ:AAPL) and by startups if it continues to be part of eBay.”
When Musk and the rest of the original PayPal team sold to eBay Inc (NASDAQ:EBAY), they were nowhere near as wealthy or successful as they are now. While they probably saw the potential for PayPal to become a powerhouse financial service, with mobile payments bringing the internet company into live transactions, it was still a relatively small company and the sale gave them the boost to pursue other projects (Musk, of course, is also behind Tesla).
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PayPal is outgrowing its parent company
Since then, PayPal has outstripped eBay Inc (NASDAQ:EBAY) and has still has more growth potential. While a slim majority of PayPal transactions came from eBay in 2008, last year that was down to just 30%.
“It will either wither or be spun out,” says Musk. “Carl Icahn can see it, and he’s not exactly super tech savvy.”
PayPal is a jewel: Icahn
Icahn isn’t one to get worked up over the latest hot stock, but he clearly has a strong sense for value. “I don’t think eBay Inc (NASDAQ:EBAY) is a well-run company. When the tide is rising high, everyone looks good. Just compare eBay to Amazon.com, Inc. (NASDAQ:AMZN). PayPal is a jewel, and eBay is covering up its value,” said Icahn. “If you just went out and took it public you’d get a huge premium because of growth.”
Icahn owns about 2% of eBay, and he has a long history of fighting management over what he wants a company to do. Even if eBay Inc (NASDAQ:EBAY) hasn’t been talking about the possibility of a spin-off, the combination of a high profile article (PayPal president David Marcus will be on the cover of the next print issue of Forbes), and a push from the company founder and a very aggressive investor, they may have to start soon.