Larry Robbins of Glenview Capital Management thinks it’s great news that Ebay is spinning off Paypal, according to ValueWalk. eBay can manage quite well with its core business and $15 billion in cash without Paypal. It will likely use its cash horde to buy back its own stock and prop up its value. Robbins noted companies with aggressive buybacks are four times as profitable as the average S&P 500 stock.
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At first eBay was resistant, but Robbins thinks what made the company cave was the wrath of shareholders; “Directors can get socially embarrassed being voted off the board.”
Although Robbins recently celebrated his nuptials, he is still enough of a realist about life situations to compare the story of eBay and Paypal to a beneficial divorce. “Once they are separated, one party will be focused on spending and the other will be focused on payments. Post-divorce, the odds of getting lucky increases. The companies when separated will be more attractive to another suitor, and could get into a beneficial takeover relationship and boost the stock price.”
On worries that Apple Pay will cut into Paypal’s business, Robbins says he is not worried; “Being scared that Apple entering epayments is going to damage Paypal is like being scared of the Halloween 16 sequel. People have seen this before.”