Well Rounded Investor

My journey of becoming financial independence by 35 years old

Recent Buy – I can trade like Icahn

960-ebay-and-paypal-split-scheduled-for-july

Ebay:

  • eBay’s biggest goal now is growing its user base. The platform has 25 million sellers and more than 157 million active buyers.
  • Shoppers can browse roughly 800 million live listings at any time, according to company officials.
  • The company had revenue of $8.8 billion in 2014.
  • One of the original dot come business that is still around that can stand to make a profit among: Yahoo, google, amazon, etc.

PayPal:

  • PayPal had more than 165 million active accounts and processed more than $235 billion in payments in 2014.
  • It had revenue of $8 billion in 2014.
  • Through the PayPal spin-off, eBay stockholders as of July 8 will receive one share of PayPal stock for every share of eBay stock they own.
  • After the split, eBay will focus solely on e-commerce, while PayPal will remain focused on digital payments
  • PayPal’s $45 billion valuation is 30 times what eBay originally paid for the company back in 2002, but it may give some investors pause. It earned only $419 million in net income last year.
  • PayPal’s service is currently accepted at over 10 million merchants, most of which are online.

What history says about spin off?

A 2008 piece by Investopedia highlights, among other things, a 2000-05 Lehman Brothers study that shows both spun-off companies (45%) and their parents (40%) beat the market by quite a sizable margin during the first two years after breaking off, as well as an older study published in the Journal of Financial Economics that determined that spinoffs and parents beat the S&P 500 by a 30% and 18% margin, respectively, during the first three years after breaking apart.

This purchase will not add any dividend into my stock profile, but traditionally all financial stocks will pay a small amount of dividends. PayPal might follow the same suit to attract dividend investors after it’s done making acquisitions once the split is completed.

I purchased 20 shares of eBay, because I want to own PayPal prior to it splitting with eBay, so I can buy it at cost. I personally use eBay many times and choose to pay with PayPal for simplicity and I can get my money back if something were going to happen with the transaction. So, after getting pressure from Icann, the activist investor, eBay agreed to split itself up.

I own a 4-plex and a triplex, so I have many appliances that need to be fixed. Many times, I just do research online to see what part need to be replaced and I just use eBay to buy the parts. It is quite simple to fix, as many of the fix only require a few screws, as long as I get the right diagnosis. I can’t see myself stop using eBay as the prices are a lot cheaper fixing the appliances rather than buying new ones or hire someone who would blow up the prices.

What you you think? Have you taken advantage of the recent stock pullback?

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One comment on “Recent Buy – I can trade like Icahn

  1. roadmap2retire
    July 9, 2015

    Interesting purchase, WRI. I dont follow the non-dividend paying stocks as closely, so cant comment on the valuation…but from what Ive heard and noticed, it appears to be good for the overall health of the company. Time will tell if thats the right option.

    Best wishes
    R2R

    Like

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This entry was posted on July 8, 2015 by in Best post.

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