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Sun Oct 19 2008 14:59:49

eBay Borrows $1 Billion while $3 Billion Sits Offshore

By: Ina Steiner

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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.




Comments (88) | Permalink

Readers Comments

eBay Borrows $1 Billion while $3 Billion Sits Offshore   eBay Borrows $1 Billion while $3 Billion Sits Offshore

This user has validated their user name. by: Ming the Merciless

Sun Oct 19 15:06:45 2008

Ebay has borrowed $1B from taxpayers.

I want my money back!

Call and snail mail your congressional delegation and complain to the rafters!

Just when you think ebay can't ethically sink any lower, they inevitably find a new way to plumb the depths of moral depravity.

Ebafia is the world's most duplicitous, deceitful, and despicable corporation in the world run by the world's most ethically challenged, duplicitous, deceitful, and despicable executives in the world.

eBay Borrows $1 Billion while $3 Billion Sits Offshore   eBay Borrows $1 Billion while $3 Billion Sits Offshore

This user has validated their user name. by: Ina

Sun Oct 19 15:19:55 2008

Just to be clear, the $1 billion is borrowed from Bank of America, et al.

eBay Borrows $1 Billion while $3 Billion Sits Offshore   eBay Borrows $1 Billion while $3 Billion Sits Offshore

by: Sun

Sun Oct 19 15:38:17 2008

Surprise? Who doesn't want to pay less taxes?

eBay Borrows $1 Billion while $3 Billion Sits Offshore   eBay Borrows $1 Billion while $3 Billion Sits Offshore

by: Patricia

Sun Oct 19 15:45:36 2008

They made the bulk of their billions off the backs of the small sellers who made their site.  Of course since they became pompous, arrogant and greedy nothing they do can be wrong (in their minds).  Sucking 1 billion out of our banks is nothing to these people because they have no conscience, no love of country, no respect for their customers, nothing other than the almighty dollar!  Their downfall will be SO well earned and SO well deserved!

eBay Borrows $1 Billion while $3 Billion Sits Offshore   eBay Borrows $1 Billion while $3 Billion Sits Offshore

by: John

Sun Oct 19 15:52:35 2008

Ina, in your article above you state:..There is something that just seems plain unpatriotic about it. What would make you think that eBay would do anything patriotic in the first place ????

eBay Borrows $1 Billion while $3 Billion Sits Offshore   eBay Borrows $1 Billion while $3 Billion Sits Offshore

by: concho

Sun Oct 19 15:59:57 2008


While eBay's Board is no doubt "acting in the interest of shareholders"

That part doesn't ring true Ina. It doesn't seem anyone has acted on behalf of shareholders in quite a while. Insiders maybe, but certainly nothing has been done to benefit the small or institutional investor in years. No dividend when profitable, and endless ponzi schemes when not. The more people that catch on, the lower the stock goes.

Count Meg's absurd compensation and loss on the idiotic acquisitions, loss of good will, and something like ten or twenty billion dollars has been utterly wasted.

That's money that could have stayed in circulation as wages and third-party earnings, investor returns,  perhaps even savings for the worker bees, the sellers!

eBay is simply a shameful corporation and a prime example of the Ugly American persona.

I do no business with eBay and I'm systematically reducing my reliance on paypal as a payment processor. I Use Magic Jack rather than Skype and keep my eye on the news to make sure I do not inadvertently spend time or money with any of the acquired companies. I hope others do the same.

eBay Borrows $1 Billion while $3 Billion Sits Offshore   eBay Borrows $1 Billion while $3 Billion Sits Offshore

This user has validated their user name. by: Ming the Merciless

Sun Oct 19 16:08:57 2008

It really doesn't make any difference which bank ebay borrowed from. credit and the funds that back credit originate from Federal Reserve system.

That's $1B less taxpayers won't have available for home loans, student loans, car loans, etc.

That ebay's BoD thought such a loan is in the best interests of the shareholders is ludicrous and dramatically illustrates the top to bottom reforms that need to take place in the financial arena.

Reforms that will NOT occur under a McCain-Cretin-Whitman administration because they're arrogant enough to think that Americans still believe in this "free market" cr*p.

Down with The Donna Hoe - Whitless cabal and Death to Ebay, Inc.

eBay Borrows $1 Billion while $3 Billion Sits Offshore   eBay Borrows $1 Billion while $3 Billion Sits Offshore

by: halfamind2

Sun Oct 19 16:26:04 2008

I posted this before, under ''Who should be Donahoe's successor?'', but it didn't even register a blink... so I'll give it another go:

Donahoe isn't going anywhere. Just like all of America has been screaming for the impeachment of the Bush Administration and now the majority of Congress too, it falls on deaf ears.

Something's up... I've no idea what, but it stinks of fascism.

As far as which bank ebay took the loan out with... it could be named AMERICA... GOD AND COUNTRY.  What's in a name, except to the concept they are trying to sell the public?  

A lot can be learned about the behavior of ebay toward investors and sellers and their own executive sell off of stocks.  Let us not forget that Meg is involved in the Republican party and was vying for the vice-pres nomination.  McCain himself made the absurd proclamation ''Meg is respected and trusted nationwide and would be the perfect Hank Paulson Treasury replacement.'' with a straight face.  That right there should show you intent.

Calling congress?  Really?  My fingertips are bloody from the emails, calls, letters to editors, blogs, you name it... it's futile and has probably only resulted in my being placed on some terror list.  When was the last time your representative responded to your concerns?

There needs to be another way to stop this crazy train... any ideas?

eBay Borrows $1 Billion while $3 Billion Sits Offshore   eBay Borrows $1 Billion while $3 Billion Sits Offshore

by: Patricia

Sun Oct 19 16:37:44 2008

http://www.petitiononline.com/mod_perl/petition-sign.cgi?jdonohoe
<
BR>Please
sign the petition

eBay Borrows $1 Billion while $3 Billion Sits Offshore   eBay Borrows $1 Billion while $3 Billion Sits Offshore

by: Patricia

Sun Oct 19 16:38:48 2008

I think this link works:

http://www.petitiononline.com/jdonohoe/petition.html

eBay Borrows $1 Billion while $3 Billion Sits Offshore   eBay Borrows $1 Billion while $3 Billion Sits Offshore

by: Jeremy

Sun Oct 19 16:44:32 2008

People get a grip. Realize that corporations don't pay taxes. The people that own shares in that corporation pay taxes on its earnings. This is a good business practice by ebay.

If you really want to know how to stop things like this from happening then read up on the Fairtax here: http://www.x31art.com/product.php?productid=16180&cat=260&page=1 or buy the book off of ebay. It would have solved our credit crunch without a government bailout. It would cause companies like ebay to move all funds, headquarters, and factories back into the US, and it would happen without costing you a dime. In fact, you would no longer pay income tax, and despite the lies of some politicians prices would stay the same. Very large corporations have vowed to lower their prices 23% the day it is enacted. Everyone else would follow suit as their inventory prices drop.

eBay Borrows $1 Billion while $3 Billion Sits Offshore   eBay Borrows $1 Billion while $3 Billion Sits Offshore

by: Justifiably Outraged

Sun Oct 19 16:56:14 2008

eBay management, of course including Meg Whitman, are a bunch of unpatriotic greedy hypocrites.  They don't care about anything or anyone else.  They just care about THEIR money and how much of it they can take from the small buyers/sellers/entrepeneurs.  That's all they care about.  I can't wait until this entire slew of hypocrites are shown the door and replaced by real people that actually do care about the people on eBay.  And forget about it Meg: your so-called political aspirations are fruitless.  You are anti the SMALL BUSINESS ENTREPENEURS...no matter your hollow statements to the contrary.  

And remember:

ATTENTION: PAYPAL IS NOT A BANK!  
                  Before you read any further, you must completely understand that fact!  I sympathize completely with all of you sellers who have been robbed by dishonest buyers who've taken your merchandise and then also taken back their payment for it...and all of you buyers who've had your personal financial information taken by dishonest sellers.  All of these illegal acts have been enabled and facilitated by Paypal and eBay.  
                 Paypal holds your money for days and weeks - yet it doesn't pay you interest. A bank must pay interest by law, as regulated by the Federal banking authorities.  Paypal can take money out of your personal checking/banking account.  Banks can only do this with a Court order.  When 'threatened' in the UK, as well as in Australia, to be regulated under those countries' banking laws, Paypal turned tail and ran, registering their 'service' in Luxembourg.
                You may post messages on these great and informative blogs, a public service in themselves.  This is all well and good and serves to help one somewhat feel better over your losses at the hands of the Paypal and eBay thieves.  But afterwards, and it only takes a few minutes, write your congressman, or write the banking authorities.  Regardless of your partyaffiliation - we're all Americans and we need this to be done for all of our good,  you can write Senator Charles Schumer from New York State (he's already received more than a few) or write Representative Barney Frank of Massachusetts.  Write and ask why is it that Paypal can operate as a bank without being regulated as a banking institution.  You can always write the SEC and the federal banking authorities and ask them to look into it.  Demand that Paypal be regulated by United States banking laws.   All of this thievery perpetrated by this now-bogus service will then all be held accountable.  It's simple and would immediately cause a beneficial change.  Just write that note.  It only takes a minute and will accomplish so much!   Remember:  PAYPAL IS NOT A BANK - UNDERSTAND THAT FACT - it can be corrected!
         

eBay Borrows $1 Billion while $3 Billion Sits Offshore   eBay Borrows $1 Billion while $3 Billion Sits Offshore

by: Daisy

Sun Oct 19 17:12:27 2008

These arrogant "people" have no grip on reality. The tides are turning regarding the sentiment toward corporate America. The American people are sick to death of this kind of "legal" manuervings.

John Donahoe is the biggest buffoon in the history of U.S. corporations. He does just the wrong things at the absolute wrong times. He calls this "counter-intuitive." I call it "he'll be shown the door sometime in the first 2009." I hope he receives no golden parachute. The board should nullify any agreements.

Disgusting! I hope the article is picked up by major newspapers and financial journals.

eBay Borrows $1 Billion while $3 Billion Sits Offshore   eBay Borrows $1 Billion while $3 Billion Sits Offshore

by: Lu McInturff

Sun Oct 19 17:43:16 2008

In a time when people have lost trust in banks and are afraid to take out a loan, and just after the "restructuring", e-bay has stepped forward to set an example of taking out a loan, which no doubt they will be able to pay off before too much interest acrues.

Regarding the 21 day hold.... as a PowerSeller there have been several times that PayPal have held monies of my Buyers.  In those instances, I write to the Buyer upon receipt of the PayPal notice and let the Buyer know that while I am anxious to ship to them and am happy they won the bid; PayPal's Shipping Service will NOT allow me to ship until money clears.  I then suggest to the person that they may want to enter or list other payment methods so that other Sellers will not have to wait.  Generally, my note is in such a manner that it strikes up a conversation with the Buyer which keeps our near 5.0 dsr's coming on strong.

I think it is a good thing for e=bay to re-enforce the Nations economy in this manner.

eBay Borrows $1 Billion while $3 Billion Sits Offshore   eBay Borrows $1 Billion while $3 Billion Sits Offshore

by: tula

Sun Oct 19 18:59:50 2008

You know, you could also look at this as eBay helping a bank make money, since they obviously have the cash to make their loan payments. This does make business sense for them, especially since they can write off interest expenses. Given the high value of foreign currencies vs. the dollar these days, it's probably advantageous to the company to maintain a lot of funds in those currencies as opposed to cashing them out right now.  There are a lot of reasons they might have taken this action, so I wouldn't be so quick to judge them on that issue.

Perhaps they're simply using some available credit to ensure it doesn't get taken away from them. A lot of businesses are suddenly finding that banks are terminating or decreasing their lines of credit for no reason. Any of you who have experienced a credit card lowering your credit limit of "chasing your balance" know what a pain this is. Better to use it and ensure it remains available, even if you don't actually need it, so that it will be there for when you do need it.  The biggest problem is that the only ones who seem to be able to get credit are the ones who don't need it.  

eBay Borrows $1 Billion while $3 Billion Sits Offshore   eBay Borrows $1 Billion while $3 Billion Sits Offshore

This user has validated their user name. by: Ming the Merciless

Sun Oct 19 19:51:22 2008

Bank of America, who Ina says loaned ebay $1B, is now half owned by American taxpayers and were part of the bank bailout.

Bank of America's financial analysts were always ebay cheerleader prostitutes so it shouldn't be a surprise who ebay turned to in their hour of need for cash (vomit).

I have a small savings account with Bank of America, and I will close that account tomorrow morning and tell them exactly why I'm closing it.

I encourage all reads of these blog to do the same and tell friends to close their accounts as well.

Bring them down.

eBay Borrows $1 Billion while $3 Billion Sits Offshore   eBay Borrows $1 Billion while $3 Billion Sits Offshore

This user has validated their user name. by: Ming the Merciless

Sun Oct 19 20:01:47 2008

Tula the omniscient ebay tuul.

eBay Borrows $1 Billion while $3 Billion Sits Offshore   eBay Borrows $1 Billion while $3 Billion Sits Offshore

This user has validated their user name. by: Ina

Sun Oct 19 21:12:55 2008

From today's CBS News:

(CBS) Banks are supposed to lend money, and when they stop - as they have in recent months - the workings of our entire economy are threatened. Credit became so frozen, the government had to step in this past week and take an ownership stake in the country’s biggest banks.

On Monday Treasury Secretary Henry Paulson summoned the CEOs of the nine largest banks to Washington - and gave them a massive amount of money so they would start lending again.

The largest of the banks is Bank of America (B of A) - now partly owned by the United States of America.

http://tinyurl.com/5r5pqt

eBay Borrows $1 Billion while $3 Billion Sits Offshore   eBay Borrows $1 Billion while $3 Billion Sits Offshore

by: Brad

Sun Oct 19 21:18:35 2008

What isn't mentioned is that the $3 billion in overseas cash is in the grubby hands of eBay International AG which is based in, you guessed it, Switzerland. Somebody in Congress ought to be asking questions about this.

Why is a corporation like eBay allowed to borrow money (effectively from taxpayers) to buy a consumer debt machine when a) it was unrestricted consumer debt which got the WORLD into this mess in the first place, and b) it already has $3 billion stashed away in a Swiss bank account.

The SEC really needs to look at eBay's business practices.

eBay Borrows $1 Billion while $3 Billion Sits Offshore   eBay Borrows $1 Billion while $3 Billion Sits Offshore

by: Keith

Sun Oct 19 21:37:08 2008

I have puked so many times this year that I can't puke anymore....  

CRIMINAL!!!!!!!!!!

SIMPLY

CRIMINAL!!!!!!!!
!!

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