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What is the advantage to spinning it off to its own company?
by icpmacdo 11y ago
What is the advantage to spinning it off to its own company?
- brianwawok 11y agoIf they think aws growth will slow they can get a big pile of cash to put into their retail or another business.
- adventured 11y agoYou do that when the value inside the company is being perpetually vastly under-represented (combined with shareholders applying a lot of pressure to unlock, say, a stagnant stock price). For example, if AWS is worth $100 billion in ten years, and Amazon as a whole is only being valued at $150 billion in the public market at the time. Separate the two might be worth $100 billion each at that point. The argument for eBay spinning off PayPal is this same premise - that PayPal is being undervalued by a lot hiding inside eBay.
- chatmasta 11y agoAmazon is losing money as a whole, but AWS Is profitable. Isn't that the same concept as PayPal hiding in ebay?
- adventured 11y agoeBay is extremely profitable, far more so than PayPal. PayPal's margins are not particularly impressive. PayPal however is growing much faster than the auction platform (which is hardly growing). The old processors like Visa and Mastercard have had amazing value increases in the last ten years. Visa is now a $160 billion company with 40% net income margins. PayPayl is a very attractive target for the big four of Visa, Mastercard, Discover, Amex. That will drive up its perceived value. One of those big four is very likely to go after a merger or acquisition of PayPal after the spin-off.