By Brian Chant
Corporate giants like Amazon have taken a strong grasp on the online shopping market which has led other vendors to suffer. One company that has reported less than ideal earnings is eBay, an online marketplace selling new and used items.
In the beginning of the decade, eBay was a top performer within the consumer sector. Millions of users flocked to the site to find everything ranging from used clothing to the latest technology but since then, they have encountered issues with retaining customers to their virtual marketplace.
Jeff Sprecher, CEO of the Intercontinental Exchange and its’ subsidiary, the New York Stock Exchange, had significant interest in acquiring eBay. This was done in hopes of reviving the company and improving their dwindling earnings. Sprecher had come up with the idea based on the ideology both the Intercontinental Exchange and eBay provided a marketplace to organize data and he found this partnership to be the next technological shift forward.
However, Meg Whitman, the current Chief Executive Officer at eBay was not sold on this proposition. She did not see how the ICE would be able to improve the performance of eBay so far but Sprecher believed in thinking creatively and the impact of these types of transactions.
He was adamant that both companies would be able to complement one another for the long term, “ICE has a long history of creating shareholder value and we’ve done so by thinking outside the box and by engaging in value-accretive transactions” (WSJ Nguyen 1).
Whitman did not alter her opinion and she did not think that the ICE should have the ability to acquire eBay. This begs the question, is it ethical for large exchange trading companies to acquire small companies within the exchange if their performance is less than ideal.
Back in 2008, during the early stages of the recession, the New York Stock Exchange acquired the Philadelphia Stock Exchange for $652 million.
After this acquisition, this became the third largest options market within the US by handling trades for 3,600 equity options and 15 index options. Accounting for the FX options as well, this merger currently manages over 16% of all US market share in exchange traded stock.
The NYSE was hopeful that they would be able to rejuvenate the prosperity of eBay similar to what had happened with the Philadelphia Exchange. However, the NYSE was successful with this original merger because they offer the same service. However, exchange based companies are leaning towards the data and technology route since technological innovation has been at the forefront of all industries. This acquisition comes into play during a time where the Intercontinental Exchange is looking to solidify themselves as an irreplaceable part in the machine of FinTech, “They don’t just run marketplaces and invite VIPs to ring the opening bell. They sell data to brokers and hedge funds, they concoct indexes used by the $6 trillion global exchange-traded fund industry, and they sell trading technology” (WSJ Osopovich 1). If the Intercontinental Exchange can maintain this position within the FinTech industry, they are guaranteed prosperity for the next few years.
Technology has made a significant impact on every part of our lives and the world of trading has been making waves lately. It will be interesting to see how these acquisitions impact the industry within the next five years. Based on the current economic outlook, only time will tell.