The online auction giant eBay has announced that PayPal, the division that handles Internet payment, will be spun off and become an independent company. The eBay CEO John Donahoe (photo ©Michelle Kung) has simultaneously announced his resignation at the end of this separation.

PayPal is a service launched in 1999 by Confinity. In 2000 the company was bought by X.com, founded by Elon Musk, who concentrated his efforts on PayPal’s Internet payment services, so much that PayPal became the new company name. It grew considerably and in 2002 it was acquired by eBay for $1.5 billion.

Today transactions through PayPal amount to billions of dollars but a huge power struggle was fought within eBay about its future. Carl Icahn, a well known investor often at the center of major financial maneuvers, in recent months acquired a share of eBay and immediately started promoting the idea of a PayPal spin off.

CEO John Donahoe believed that a PayPal spin off wasn’t a good idea but in the end his position lost. A defeat like that damages the credibility of a CEO so Donahoe’s resignation was inevitable.

The announcement of PayPal’s spin off immediately pushed up eBay’s shares. They went up 7.45% touching $59.20, almost the highest in the last 52 weeks. This confirms the trend of recent years to have companies that get broken when they reach a certain level of growth and diversification. Shareholders prefer to invest in companies focused on a certain type of activity in order to find more easily ways to increase the value of their shares.

According to the plans, in 2015 PayPal will become an independent company that will be listed at Wall Street. In this way, it will be more prepared to fight Apple’s payment system ApplePay and the Alibaba’s growth. For Carl Icahn that’s not enough because he wants an important acquisition or a merger with another solid player. In short, the spin off could be just the beginning.

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