EBay Shares Up Nearly 5 Percent

The company sees a pop despite rumors of a PayPal spinoff.
5:05 | 08/21/14

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Transcript for EBay Shares Up Nearly 5 Percent
It's. I'm Mary -- in Washington as the financial markets close on Wall Street for this Thursday August 21 this story stock. Shares of 5%. After rumors swirling on Wall Street about a PayPal spin off. For more on this story I want to welcome Aaron task from Yahoo! finance. So -- know about this report. Well we know it's based on rumor really and it's amazing that you stock of this -- company -- big cap completely -- popularly 5%. I don't rumors of the spinoff from -- sick of the information I frankly hadn't heard -- today but traders. Took that information no pun intended -- man with it. I decided -- -- is gonna spin off PayPal. Which has been a great investment for them so it would generate a lot of profits for -- day but still rumor at this point. So how would this potential spin -- be beneficial to eBay -- to the payments company. Right well eBay bought PayPal back in 2002. For one point five billion dollars at the time it was a that was crazy they were while we were paying for it. And I gotta believe that that PayPal is now worth I don't know 1520 billion dollars in the current marketplace and if they're gonna get a tremendous return on that investment. A lot of cash that you -- can then use to turnaround -- -- invest. And the company buy back their stock paid dividends to their shareholders a very positive for you day. -- pick out an opportunity for them to operate independently again as they had they had been prior to you be requiring them. And really this is about attracting talent. So David Marcus who was ahead -- PayPal recently left for FaceBook and eBay is looking for a -- had -- -- PayPal. And in the environment we live in. You know executive senior executives who come -- and run a country the size of PayPal. You know they want to get paid and how idea hated when you're the CEO the company and there's a public offering. And so this is going to be a very nice. Way for them to a -- to lure someone. You know -- is probably got a of the very big job right now at a very big corporation. To come overrun pay -- to -- we're gonna spit it out and go public and then you're gonna get a big payday. So -- just these rumors alone are driving the stock price up 5%. Explained -- was a little bit more how a separation actually increases shareholder value. -- will it will get for free. -- you know they're gonna get a big paycheck right or -- return on that investment and so then the they have an opportunity to you. Reinvest that money in their business to make it better and begin buying back stock and issuing dividends are our major ways that corporations in America to every -- their shareholders. Also this PayPal as intertwined with -- day so I still think in as an eBay user you also get the benefits of using PayPal if you want to you. So I would imagine and hope that. It would it would be fairly seamless from the consumer's point of view. But. It's a little bit of financial engineering you're gonna move some papers around an -- create there's -- paper profit right now do you -- and this -- Make it a real profit and they can use that money. Not activist investor Carl Icahn has been demanding this but for some time without actually rejected by eBay CEO John Donohue so. Why does the board initially ignored -- suggestion. -- -- -- This is the dance that a lot of corporations are going on right now Carl -- he comes out in public says hey you gotta do this this in this and they say no we're not gonna do it. And then behind the scenes they talk to him and other activists and -- is this really make sense. I do you also thinking that you know. Marcus leaving. You know change -- dynamic for eBay it and and done away at any day to say okay we need someone to come and in the PayPal we want somebody -- -- have a better chance of getting somebody greed. If we're able to you give them this opportunity to see -- -- to take this company public as a spin off again that's a big payday for whoever's running PayPal at that time. So how should retail investors play this stock right now do you see a long term value here. Well it is got a great business -- a great brand and and so does PayPal to be -- -- sit in in the last few years there's been a ton of spinoffs. Throughout the market -- it Time Warner and timing spinning off. CBS and CBS outdoors enough I mean there there's a long list of spin -- and recent history shows that this this spun off company which is -- the smaller part those stocks have outperformed. The parent company. So they appeared eBay shareholder you want to own that PayPal spin off of it does come the capacity may be EB surely we'll get a piece of the action made the opportunity to buy it. Outright in the market and so it. Right now the way the market is gone last couple years people are. Both anticipating. You know the big profits for eBay and thickened about this tape cost -- -- is gonna be -- hot IPO. Aaron task from Yahoo! finance as always thank you for joining us that you've been watching story stocks stay with abcnews.com. For your latest headlines. I'm Mary Bruce in Washington.

This transcript has been automatically generated and may not be 100% accurate.

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