PayPal, the Digital Payment Processor Valued at $52 Billion

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The shares of PayPal Holdings Inc jumped as much as 11% in the anticipated return to Nasdaq, valuing it at about $52 billion. PayPal processed almost 4 billion payments that is a total of about $235 billion in the year 2014. After the company got snapped up by eBay in the year 2002, the online payments landscape changed drastically.

PayPal is now likely to partner with various e-commerce sites and would try to capture the market share from startups such as Apple Inc, Stripe and Square.

The separation allowed eBay to focus on its e-commerce marketplace. PayPal shares soared high to $42.55 in the early trading, while eBay’s stock fell as 4.7%, valuing the company at nearly $32 billion.

PayPal is further on its way to compete with Western Union Co and various other money transfer companies.

Founded in the late 1990s, PayPal was set up by Tesla Motors Inc, venture capitalist Peter Thiel, CEO Elon Musk and others. In the year 2002, it went public and got acquired by eBay.

The pressure from activist investor Carl Icahn fostered eBay to split PayPal as this would provide both the companies more flexibility and focus. However, both the companies are not severing ties altogether. eBay agreed that it won’t cut the transactions volume that it channels via PayPal for the upcoming five years.

According to market analysts, PayPal relatively had a low EBITDA margin profile of 27%. This is almost half that of the credit card giants, such as Visa Inc and MasterCard Inc.

PayPal also faces a tough fight in the rapid emerging mobile payments market. Also, the company recently acquired Xoom. This is an effort to place it in a position to take on MoneyGram and Western Union’s online businesses.

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