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eBay, Inc. surprised economists recently when they publicized their decision to haul a majority of its foreign cash back into the U.S. The company will pay $3 billion in taxes to do so, which is among the largest cash repatriations to happen in quite some time.
“The online marketplace reported first-quarter profits above forecasts, but the tax charge and a weak outlook for the current quarter sent the company’s shares tumbling,” wrote Greg Bensinger of The Wall Street Journal.
The California-based company plans to bring back $9 billion-money, which at one time, the company had planned to invest overseas indefinitely. eBay announced that they intended to pay the difference between foreign tax rates and U.S. tax rates. “The tax charge and a weak revenue outlook sent the company’s shares down more than 5 percent in after-hours trading yesterday,” wrote Sarah Drake of the Silicon Valley Business Journal.
At the close of 2013, eBay held $12.8 billion in cash and investments, with $9.7 billion of that amount tied up in foreign accounts.
“Other companies have opted against taking such a tax hit, and instead opt to borrow cash to use for expansion. Apple, which is famous for its massive overseas cash pile, said Tuesday it would sell $12 billion in bonds, just a year after selling $17 billion in bonds, according to the Journal,” wrote Drake.
On April 29th, eBay announced its first-quarter earnings of $2.3 billion loss on $4.3 billion in revenue. The company estimates potential earnings of 51-53 cents during the second quarter.
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