Paypal Valued At About $50 Billion Ahead Of Market Debut

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PayPal Holdings Inc (PYPL.O) shares rose 5.9 percent in premarket trading, ahead of their highly anticipated return to the Nasdaq, valuing the company at about $50 billion.

PayPal, spun off from eBay Inc (EBAY.O), is widely expected to build partnerships with e-commerce rivals and try to seize market share from startups such as Stripe and Square and technology behemoth Apple Inc (AAPL.O), which unveiled its own mobile payments service last year.

PayPal shares traded at $40.62, up from Friday’s close of $38.35 when the shares were trading on a “when issued” basis.

“PayPal is the gorilla among independent digital payment

service providers with more than 160 million active accounts, global scale and brand recognition,” J.P. Morgan analysts said.

PayPal is also looking to compete with Western Union Co. (WU.N) and other money transfer companies. CEO Dan Shulman said he was looking to use Paypal’s size to offer affordable financial services widely.

“It’s clear that the potential for mobile technology to transform money extends beyond commerce. The vast majority of the world’s 7 billion people lack access to even basic financial services,” Schulman told Reuters.

PayPal was founded in the late 1990s by venture capitalist Peter Thiel, Tesla Motors Inc (TSLA.O) CEO Elon Musk and others. It went public in 2002 and was acquired by eBay soon after for $1.5 billion.

EBay has split PayPal back off again, saying this would give both companies more focus and flexibility.

Based on eBay common stock outstanding as of June 1, about 1.22 billion shares of PayPal common stock would have been distributed to eBay shareholders.

“We believe PayPal represents the most direct way to play growth in online and mobile payments, which we expect will grow several hundred basis points faster than the industry as online takes share,” BMO capital Markets analysts said.

They said they expected investors to value PayPal relative to Visa Inc (V.N) and MasterCard Inc (MA.N), but added that PayPal had a relatively low EBITDA margin profile – 27 percent versus 60-70 percent for the two credit card giants.

Analysts added that PayPal faced a fight in the rapidly evolving mobile payments market.

“… user engagement is changing, and the competitive advantages PayPal enjoyed in the traditional online commerce channel do not necessarily carry over into the mobile and offline worlds, in our view,” JP Morgan analysts said.

Last week, eBay said it would sell its enterprise business to a consortium led by private equity firm Permira, a deal that leaves eBay with its marketplace business, where it faces stiff competition from rivals such as Inc.