SAN JOSE, CA: After opposing the idea for months, eBay has decided to spin off PayPal into a separate publicly traded business, and PR pros agree the company is communicating the move properly by focusing on the future.
Rather than looking flaky for changing their mind in such a short time span, eBay’s move shows that it has its finger on the market’s pulse, said Kristen Sharkey, EVP and technology practice lead at Makovsky.
Activist shareholder Carl Icahn has been pushing the companies’ separation since a January conference call, writing numerous open letters to other shareholders questioning the abilities of eBay president and CEO John Donahoe and referring to the company’s corporate governance as the "worst he had ever seen."
In response, the companies’ execs stuck to the reasoning that eBay had been funding PayPal's growth, and the two were better off together. Donahoe in March specified that a spinoff was "not a good idea."
However, Donahoe changed his tune on Tuesday, explaining in a press release that a recent strategic review concluded that keeping eBay and PayPal together was becoming "less advantageous."
Mobile payments have changed dramatically in the past six months, explained Sharkey, so eBay’s decision shows the company is not afraid to make the right decision at the right time, based on what makes sense for the market it operates in.
"They are taking another look at the situation and saying this move didn’t make sense then, but it makes sense now," she said. "Big companies should continue to be nimble and make sure they have their finger on the pulse of the market."
Sharkey added that companies have to be able to make decisions quarterly if they need to, rather than on a three-to five-year basis.
By separating the companies in 2015, eBay explained in a statement that they would be able to capitalize on respective growth opportunities in the "rapidly changing global commerce and payments landscape, and [it] is the best path for creating sustainable shareholder value."
Tanya Meck, EVP, MD, and head of communications at Global Strategy Group, said she agrees with the way eBay has communicated its business decision so far.
"As much as the press wants to revisit the conflict [with Icahn], eBay has resisted the temptation to go back in time," she said. "Instead, eBay has just said that for business reasons they have made a different decision, explained why that is important, and hammered home the benefits this brings to both companies going forward."
EBay has to stay focused on communicating why it has made this decision, the rationale behind it, the path forward, and how the change is going to maximize shareholder value, said Lisa Rose, head of Dix & Eaton’s IR practice.
"Activism is becoming more the norm than the exception, so it is important for companies to be able to defend and communicate their strategy in a persuasive and meaningful manner, constantly," she said.
Internally, eBay should be communicating why the spin-off was the right decision, and how it is committed to seeing it through successfully, Rose added.
Paypal has evolved over the years, said Sharkey, and "now has the opportunity to partner with online companies, like Amazon and Alibaba, which it wouldn’t have been able to do if it stayed with eBay."
She added that the decision is "win-win" for both companies because it also allows eBay to focus on specific growth areas and offerings going forward.
Donahoe and eBay CFO Bob Swan are responsible for leading the separation of each business, and both executives will step down after the separation is completed. Although Donahoe and Swan will no longer hold executive management positions at the two companies, they may be board members, according to a company statement.
Devin Wenig, currently president of eBay Marketplaces, will become CEO of the new eBay company, leading the eBay Marketplaces and eBay Enterprise businesses. The current CFO of eBay Marketplaces Scott Schenkel will become the CFO of the new eBay company.
Effective immediately, former president of American Express’ Enterprise Growth Group Dan Schulman has been appointed president of PayPal and CEO-designee of the standalone PayPal company following the separation.
Last spring, PayPal brought on MSLGroup as its AOR for North America. Representatives from MSL declined to comment on the spin-off.
In May, PRWeek reported that eBay is one of Edelman’s top clients. Edelman representatives did not respond to inquiry for comment.
EBay and PayPal were actively tweeting about the decision on Tuesday.
eBay Inc. to separate eBay and Pay into independent companies in 2H 2015 http://t.co/ktEvhWFdt0
— eBay Inc. (@ebayinc) September 30, 2014
Big day for PayPal today! Welcome Dan Schulman as our new president. http://t.co/w7fJuh4kbH
— PayPal (@PayPal) September 30, 2014
Honored to lead the legendary @PayPal during this exciting time! Can't wait to get started. http://t.co/DWdvWtgboc
— Dan Schulman (@Dan_Schulman) September 30, 2014
Icahn chimed in on social media with a link to a statement praising the decision, but not without his quips.
Happy about spin off of PayPal. Read more on my thoughts concerning future of $EBAY at Shareholders’ Square Table: http://t.co/n3ypp4T3yQ
— Carl Icahn (@Carl_C_Icahn) September 30, 2014
