It’s no secret that PayPal (PYPL) stock will begin trading independently from its longtime parent, eBay (EBAY), next week. Activist investors have been calling for the digital payment service to leave the umbrella of the online auction house for years now, and eventually, eBay gave in.
Last September, after incessant badgering from Carl Icahn, the company agreed to spin off PayPal. Investors rejoiced, bidding EBAY stock higher on the news. After all, one day, they’d be able to own PayPal stock by itself without that pesky laggard-of-a-business eBay dragging it down.
On this coming Monday, July 20, the split will be final, and shares of standalone EBAY stock and standalone PayPal stock (trading under the ticker “PYPL) will begin trading. EBAY shareholders will receive one share of PYPL stock for every EBAY share they own.
One might fairly assume that Monday will be the first day investors can buy PayPal stock all by itself.
Fortunately for the opportunistic investor, that’s incorrect. You can buy PayPal stock all by itself right now.
PYPL Starts Trading Monday … But Why Wait?
You can actually buy both standalone PayPal stock and standalone EBAY stock today, before they start regular trading on Monday. Instead of PYPL, PayPal’s ticker in the meantime is PYPLV, while the ticker for standalone EBAY stock is EBAYV. (I’m not sure why anyone would want the latter, but hey, whatever floats your boat!)
There’s a rather esoteric reason behind all this, but what you need to know is that PYPLV stock will convert to PYPL stock on Monday, and EBAYV stock will convert to EBAY on Monday as well.
The current strange iterations of PayPal and eBay stock are called “when issued” securities, and they only come around every so often, usually after some sort of stock split or new issue has been “authorized but not yet issued,” Investopedia explains.
Anyone thinking about getting a jump start on the markets and buying PYPLV before July 20 should know that, technically speaking, your buy order is conditional on PYPL stock being issued — only then does your transaction officially settle.
But barring some incredible, unforeseen turn of events, the eBay-PayPal spinoff will go through as planned. Knowing this, I went and bought myself a healthy dose of PYPLV stock yesterday.
Why wouldn’t you want PayPal? It’s practically the only thing keeping eBay’s stock price from imploding. Consider last quarter, for instance:
“For the first time, PayPal revenues exceeded those from eBay’s Marketplace; while PayPal revenue of $2.11 billion was up 14% year-over-year, Marketplace revenue fell by 4% to $2.07 billion.”
Another reason I bought PYPLV — remember, it’s the nascent version of PYPL — is that once EBAY shareholders get their PayPal stock and officially own two distinct companies (PayPal and eBay), there will be more than a few of them that instantly dump EBAY and double down on PayPal.
Personally, I’d like to beat them to it.
Analysts like PayPal stock, too: Cantor Fitzgerald rates PYPLV a “buy” and tags it with a $45 price target; Keefe, Bruyette & Woods gave shares an “outperform” rating and a $43 price target; Deutsche Bank (DB) gives it a “buy” rating and $42 price target, and Goldman Sachs (GS) gives it a “buy” rating and $48 target price.
That’s not to say there’s no risk, of course. There’s no such thing as no risk in the stock market.
The main risk is competition: Apple (AAPL), Google (GOOG, GOOGL), Intuit (INTU) and even Facebook (FB) all have mobile payment technologies that could usurp PayPal in time.
But it will take any competitor longer than a few days to dethrone PayPal, and in the few days before PYPL stock begins regular trading on July 20, retail investors like you and me have a chance to get in on the action early.
After EBAY’s earnings beat this morning, I’m glad that I did.
As of this writing, John Divine was long shares of PYPLV stock and AAPL stock. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.
