PayPal Reveals Plans to Sell Shares
Thu Jun 13, 7:31 AM ET
By MICHAEL LIEDTKE, AP Business Writer
SAN FRANCISCO (AP) - Online payment provider PayPal Inc. said its co-founders and other key insiders will cash in on the company's hot stock by selling millions of shares sooner than anticipated, a development that overshadowed news of a favorable decision from banking regulators.
The Mountain View-based company said at least 6 million shares will be sold by its stockholders in the secondary offering. PayPal's co-founders, Elon Musk and Peter Thiel, are selling the largest individual stakes.
Musk, who resigned as PayPal's chief executive in September 2000 but still remains on the company's board, plans to sell 1 million shares, according to documents filed with the Securities and Exchange Commission ( news - web sites). After the sale, Musk, 30, will still own 6.1 million shares, or a 10.1 percent stake in the company.
Thiel, who succeeded Musk as CEO, is selling 574,701 shares, leaving him with 2.2 million shares, or a 3.6 percent stake.
By CEO standards, Thiel, 34, received a relatively modest salary last year — $147,084. He stands to collect more than $10 million on his stock sale, based on the recent trading range of PayPal's stock.
Other significant stakes are being sold by: Max R. Levchin, 26, the company's chief technology officer; David O. Sacks, 30, the company's chief operating officer; and Reid G. Hoffman, 34, an executive vice president.
The disclosures raised new investor concerns at the same time management tried to erase another worry by announcing New York state regulators had concluded the company's online payment service didn't break banking laws.
The New York regulators had warned PayPal might need to be licensed as a bank, a requirement that could have diminished the company's growth prospects.
Despite that positive ruling, PayPal's shares fell $1.83, or 7 percent, to close at $23.65 Wednesday on the Nasdaq Stock Market.
It's not unusual for entrepreneurs to liquidate some of their holdings once their companies become publicly traded, particularly one that has been as warmly received as PayPal. Since PayPal's initial public offering of stock at $13 per share in mid-February, the shares have traded as high as $30.48.
But the timing of the sale and the size of the insider stakes involved appeared to catch investors off guard, said analyst Christopher Penny of Friedman, Billings, Ramsey.
After most IPOs, top executives usually can't sell any of their shares for at least six months — a timetable that would have prevented PayPal insiders from cashing out until mid-August.
An IPO's investment bankers, though, have the flexibility to lift the restrictions earlier, an option that was exercised with PayPal to give insiders a chance to lock in seven-figure windfalls.
"You may as well strike while the iron is hot. There is a lot of appreciation for PayPal right now," said analyst James Van Dyke of Jupiter Media Metrix.
PayPal has emerged as a high-tech rarity — an Internet business that makes money. The company turned its first profit during the first quarter of this year when it earned $1.2 million. PayPal expects to earn $5.5 million to $5.8 million in the second quarter.
The company makes its money by using e-mail to deliver payments between buyers and sellers on the Internet. As of March 31, PayPal had 15.4 million accountholders.
___
On The Net:
paypal.com |
