PayPal

PayPal, Inc. "resulted from a merger between Confinity, Inc., incorporated in December 1998, and X.com Corporation, incorporated in March 1999." Peter Thiel and Max Levchin co-founded Confinity; Elon Musk, earlier a co-founder of Zip2, founded X.com, which "intended to provide Internet banking services." On March 30, 2000, X.com merged with Confinity, X.com surviving; by October 2000 the company had abandoned internet banking for the PayPal product, and it took the name PayPal, Inc. in February 2001. Musk was chief executive of X.com from March to December 1999 and of PayPal from May to September 2000, when Thiel, a former Sullivan & Cromwell lawyer and derivatives trader, replaced him; Levchin was chief technology officer. In September 2001 Musk was the largest shareholder, with 14.2 percent, ahead of entities affiliated with Sequoia Capital (10.7 percent), whose partner Michael Moritz sat on the board, and Nokia Ventures (9.6 percent); Thiel held 5.6 percent and Reid Hoffman under one percent.¹

The company then had 10.0 million registered users, most of whose payments concerned online auctions. It disclosed that "during the four months between July and October 2000, we experienced a significant fraud episode," with gross losses from unauthorized charge-backs of 5.7 million dollars, and that MasterCard had fined it for excessive charge-backs.¹

Flotation and Sale

PayPal sold 5,400,000 shares at 13 dollars in its initial public offering, under a prospectus dated February 14, 2002, on the Nasdaq National Market as PYPL.² On July 8, 2002, eBay announced that it would acquire the company. The merger was completed on October 3, 2002, at 0.39 of an eBay share for each PayPal share, a transaction eBay valued at about 1.5 billion dollars, and Thiel resigned as chief executive the same day.³⁴ Members of the founding group went on to found or lead LinkedIn, Palantir Technologies, Founders Fund, Tesla and SpaceX, and became known as the PayPal Mafia.⁵