PayPal Holdings Inc. (NASDAQ: PYPL) is back on the market as its own company. The spin-off from eBay Inc. (NASDAQ: EBAY) has taken place, and a gain of 7% to $40.92 has PayPal valued right at $50 billion. New investors need to understand that the eBay/PayPal situation was a crowded trade. Still, some investors may wonder whether PayPal should carry a $50 billion valuation, if they go back to when eBay acquired PayPal in the first place.

This is worth more than 30 times when eBay first acquired PayPal. While eBay and PayPal have signed long-term agreements, the reality is that PayPal might not have grown this much had eBay been able to successfully manage its own payments network rather than having to buy PayPal. Another trick here is that PayPal even announced an acquisition of Xoom before the spin-off by eBay was completed.

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PayPal used to trade on the Nasdaq on its own, until eBay acquired the payment processor. PayPal also used to trade under the same PYPL stock ticker as well. The eBay and PayPal press release from 2002 showed the following:

eBay will acquire all of the outstanding shares of PayPal in a tax-free, stock-for-stock transaction using a fixed exchange ratio of 0.39 eBay shares for each PayPal share. Based on eBay’s stock price on July 5, 2002, the acquisition is valued at $1.5 billion. According to preliminary estimates, the recognized purchase price is also expected to include approximately $18 million for acquisition-related costs.

One has to imagine how much PayPal would have grown (or not grown) had it not had the eBay auction and BuyItNow traffic. The joint release from 2002 showed that approximately 60% of PayPal’s business took place on eBay at that time. eBay’s community was 46 million users worldwide at the time, and eBay even noted simultaneously that its experiment of eBay Payments by Billpoint would be phased out after the 2002 announced deal would close.

PayPal’s new market cap implies that the shares are now worth 33 times more than they were in 2002. PayPal processed roughly 4 billion payments in 2014, with a total processing amount worth close to $235 billion in that year alone.

On June 12, 2002, PayPal announced that its second quarter of 2002 revenues could range between $53 million and $54 million, and pro forma earnings per share could range between $0.08 and $0.09 per share. Additionally, PayPal estimated that its total payment volume could range from $1.61 billion to $1.63 billion. The combined 2014 data was as follows:

Fiscal 2014: eBay (with PayPal and eBay combined) reported a total of $17.9 billion in revenue and $3.51 billion in operating income. The PayPal filing showed that its pro forma annual revenues were $8.01 billion with operating income of $1.22 billion.

PayPal shares were last seen up 7% at $41.14, and eBay’s shares were up 4% at $29.01.

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