On the eBay and PayPal Split

PayPal is a fast-growing business, and on its own, would warrant a different valuation (i.e., from its parent company).

eBay will "split off its payments arm PayPal, finally bowing to pressure from activist shareholder Carl Icahn."

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If a shareholder is not happy with the company performance, or if he or she believes the company can do something to lift that performance, but isn't doing so or won't do so, then he or she may decide to take action.  As Icahn clearly has done and is known to do.

Paypal has been growing rapidly and there has been an impression among shareholders that the division is carrying the whole company and will command a higher valuation as a stand-alone entity. This may be true as growth stocks (companies with strong growth in EPS) tend to command high valuation in the market. Paypal’s earnings growth will be more transparent now and investors can benefit from capital gains as the stock is likely to trade higher. In other words, the valuation of eBay and Paypal as one entity is likely to be lower than the sum of their valuations after spin-off.

Reference: The Positive Side Of Split Between eBay And PayPal.

This Forbes article may be too technical or sophisticated for its own good, because it may be missing the obvious:  Of course there is a positive side to the split, otherwise Icahn wouldn't have pushed for it.  Here's what I see with my non-analyst eyes:

(graphic credit)

Looked at in a granular vein, eBay has had a rough go the last two years at building analyst confidence on its growth potential.  Taken from a five-year view, eBay has leveled off, flattened out, lost its luster.  Use whatever phraseology makes sense to you, but I think PayPal may have been propping the company versus eBay itself has been dragging the company.

Clearly Icahn is expecting PayPal performance on its own to rise.  I don't know if eBay performance itself will also rise.  Clearly Forbes expects it to.  Regardless, we will all have an unveiled look at eBay, for better or for worse.  Its performance may dip or slide down after the split, before it may rise, if it can rise.  We will all see how much of analyst confidence has been driven by PayPal.