With the United States economy strapped for cash, eBay has decided to drain $1 billion from U.S. sources (banks**) while it keeps three times that much cash tucked away offshore.* There is something that just seems plain unpatriotic about it. While eBay's Board is no doubt "acting in the interest of shareholders" when it avoids paying taxes, it's especially grating considering eBay's Meg Whitman is angling for the post of United States Secretary of the Treasury, and eBay's founder Pierre Omidyar (owner of 178 million shares), plays the part of anti-Republican philanthropist.
The $1 billion loan goes to fund eBay's purchase of Bill Me Later, whose two major assets are consumer debt - $550 million in receivables - and the skill-set to issue more consumer debt.
In the meantime, eBay is squeezing its entrepreneurs by placing 21-day holds on payments. That means that some of the small businesses who sell on eBay and accept PayPal have to ship product to customers - having paid out of pocket for inventory and for shipping - and wait 3 weeks before they get the customer's money. The seller's cash sits in PayPal's account while he or she deals with cash-flow issues.
What's troublesome with complaints of overreaching of such policies is that there's no oversight. Who exactly are you supposed to complain to if you think your funds are being held without cause - eBay's customer service department?
* In an answer to Scott Devitt (Stifel Nicolaus) during Wednesday's conference call with analysts, eBay's CFO Bob Swan said: "Thanks, Scott. You know, we end the quarter, you're right, with $3.3 billion in cash. As you know, the reality of that cash is about $400 million sits here in the U.S. and the rest of it off-shore, so the inherent flexibility we have to use our strong balance sheet and our strong cash flows here domestically has a pretty severe tax rate penalty associated with it. So that's a constraint that we have to deal with,..."
(Note that 47% of eBay's net revenue comes from the US, and 53% from international.)**
** From eBay's SEC filings about the $1 billion revolving credit facility withdrawal: Bank of America, N.A., as Administrative Agent (the "Agent"); certain lenders named therein; JP Morgan Chase Bank, N.A. and Wells Fargo Bank, N.A., as Syndication Agents; and Banc of America Securities LLC, J.P. Morgan Securities Inc. and Wells Fargo Bank, N.A., as Joint Lead Arrangers and Joint Book Managers
Updated to add the second footnote.