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In just a couple of weeks, eBay and PayPal will no longer be bound together at the hip, ending a 13-year corporate marriage.

The plan was originally announced last year, and last week, the company said the separation will occur later this month, leading many to ask questions: How will eBay shareholders be compensated, and how will the two companies operate independently going forward?

EBay and PayPal have been diligently keeping the public informed over the past few months, with many updates along the way. Here’s a handy guide to what’s happening.

John Donahoe
John Donahoe

Why are the two companies breaking up?

In a release on Friday, John Donahoe, president and CEO of eBay, said it no longer made economic sense for the two to be tied together. “eBay and PayPal are two great, special businesses,” he said. “As separate, independent companies, eBay, led by Devin Wenig, and PayPal, led by Dan Schulman, will each have a sharper focus and greater flexibility to pursue future success in their respective global commerce and payments markets. I am confident that eBay and PayPal each have the right leadership team, strategy, structure and operational discipline to create sustainable, long-term value for stockholders and deliver great opportunities and experiences for customers worldwide.”

Was shareholder activist Carl Icahn behind this break up?

Technically, no. A year ago, he waged a campaign, advocating for the two entities to split up, but eBay’s management and board was staunchly against it. In a recent message, eBay’s board said they had a change of heart in September when they decided to separate the businesses because of the rapidly changing landscape in both commerce and payments.

paypal at shopWhat are the terms of the deal?

EBay shareholders will receive one PayPal share for every eBay share they own as of July 8. The board formally approved the split Friday, and said PayPal, like its parent, will trade on the Nasdaq stock market under the symbol “PYPL.” The plan is for the new PayPal shares will trade from about July 6 on a proforma basis, and then be formally issued to shareholders on July 17, and begin regular trading on July 20. No action is required by eBay’s stockholders in order to receive shares of PayPal common stock in the distribution.

How will eBay and PayPal operate independently?

EBay and PayPal will operate under a five-year agreement that will guarantee a reliable source of revenue for PayPal after the separation. Interestingly, under the agreement, PayPal can partner with competing retailers and other financial firms, and even tech companies looking at getting into payments, like Google and Apple.

What happens to eBay’s other business units? 

Over the past few months, eBay has been cleaning house. A couple of weeks ago, it sold its 28.4 percent stake in Craigslist back to the classified ads site, and settled all outstanding litigation. It also wants to sell off its eBay Enterprise unit, which helps other retailers with online sales. That division came about from the acquisition of GSI Commerce, which it bought for about $2.4 billion in 2011. According to several reports, eBay planned to find a buyer for that unit as soon as today. A sale could value the unit between $1 billion and $1.5 billion.

Sounds like a silly question, but why was PayPal ever part of eBay?

EBay, which acquired PayPal for $1.5 billion in 2002, originally pitched the deal as a way for eBay to boost PayPal transactions by driving buyers and sellers toward the payment service. But beyond that, there seemed to be few synergies.

What will be the impact on competing e-commerce giants, like Amazon?

To be sure, the separation of the two units could lead to a flurry of acquisitions, with many analysts already guessing who will buy whom. In Amazon’s worst-case scenario, if Alibaba acquired eBay and then implemented its business model here, that could get really interesting, said Scot Wingo, executive chairman of ChannelAdvisor, which helps retailers sell on various marketplaces. However, he acknowledges that risk maybe low, given that Alibaba’s CEO was just in the U.S. last month, saying he had no plans to compete with Amazon or eBay, or to buy eBay.

Putting that aside,Wingo believes the spin-off is a positive event for Amazon: “eBay has been distracted for 12 months or so with everything…eBay has only three to four months to prepare for Holiday 2015 and their new strategy isn’t clear to buyers or sellers, so there’s high probability eBay won’t be able to get the rudder going the right way in 2015 while Amazon is going 100mph.”

Sucharita Mulpuru-Kodali, a Forrester Research analyst tracking the retail sector, generally agreed. “eBay has sadly been tangential in the tech titan discussion for years and this split only marginalizes them more,” she said. “They are too big and too profitable to go away, but as a threat to Amazon? They haven’t been for years and aren’t now.”

For instance, based on Forrester data, she said 39 percent of shoppers start their search on Amazon; 11 percent on search engines, like Google, and only 6 percent on eBay.

forrester data

Could Amazon adopt PayPal for payments?

Yes. As mentioned above, PayPal will be free to work with other big marketplaces owned by eBay competitors, such as Amazon and Alibaba. The only caveat is that it would have to offer eBay the same rates it offers the competitors. Wingo said there’s been hints that a very big deal is in the works for PayPal after the split, but he sees Amazon as an unlikely candidate. “Amazon realizes that anyone could eventually acquire PayPal and they would have to take it off the site,” he said.

How big is eBay on its own?

EBay’s marketplaces business has seen revenue growth lagging behind PayPal. Still, at any given time, it has about 800 million live listings, 25 million active sellers and 157 million active buyers worldwide. About three out of every four items sold on eBay are new, and 80 percent of merchandise on eBay is sold at fixed price. In 2014, eBay’s marketplace revenue was $8.8 billion.

paypal metrics

How big is PayPal on its own?

In 2014, PayPal processed $235 billion in payment volume across 165 million active customer accounts, and handled one billion mobile transactions. In 2014, the company reported a profit of $419 million on revenue of $8 billion.

Who will be leading the two companies going forward?

EBay will replace CEO John Donahoe with Devin Wenig, who joined eBay in 2011 as president of the global eBay Marketplaces business. Prior to eBay, he was CEO of Thomson Reuters Markets. PayPal will be led by Dan Schulman, who joined PayPal in 2014. He previously worked at American Express’ Enterprise Growth division, and before that, headed up Sprint’s prepaid division through the acquisition of Virgin Mobile. At the corporate level, Donahoe will leave eBay’s board and serve as the chairman of PayPal’s board of directors.

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