- The Washington Times - Saturday, February 16, 2002

SAN FRANCISCO (AP) Shares of PayPal Inc. soared 55 percent in the online payment provider's stock market debut yesterday, signaling that investors burned by the dot-com crash might be ready to take another chance on promising but unprofitable Internet companies.

After the company's investment bankers sold 5.4 million shares at $13 apiece in an initial public offering Thursday, PayPal's stock closed at $20.09 yesterday on the Nasdaq Stock Market. The shares sold for as much as $22.44 during the session.

At yesterday's price, the company had a market value of $1.2 billion. The biggest individual winners were PayPal's co-founders, Elon Musk, 30, and Peter Thiel, 34.

Mr. Musk, formerly PayPal's chief executive and now a director, held a stake worth $143 million as of yesterday. Mr. Thiel, the company's CEO, owned stock worth $56 million.

Beside enriching PayPal insiders, yesterday's robust gain encouraged market observers who hope the rapidly growing company will rekindle investor interest in Internet start-ups.

After feasting on dot-com stock during the late 1990s, Wall Street has largely avoided the Internet sector during the past 18 months. Investors have worked to recover from massive losses stemming from the high-tech bust.

"It feels like 1999 all over again, said James Van Dyke, an analyst with Jupiter Media Metrix. "PayPal could be like the torch bearer that kicks off the Olympics."

The Palo Alto, Calif., company boasts an impressive track record for growth, swelling from 24 experimental users in October 1999 to 12.8 million customers as of Dec. 31.

The service obtains payments from credit cards and bank accounts before sending them to a designated recipient via e-mail. PayPal generates revenue by charging transaction fees based on the amount transferred and is particularly popular at online auctions such as EBay.

PayPal's strong IPO performance is bound to lure other privately held Internet companies into the stock market, predicted Kyle Huske of IPO.com.

"The market just shook off all the risks associated with this one," she said.

She and other analysts had been worried that several legal and regulatory hurdles facing PayPal might scare off investors.

Just before PayPal was set to start its IPO, New York-based CertCo Inc. filed a patent infringement lawsuit that threatens to shut down the service with a court order.

PayPal, which is nearly 3 years old, also is embroiled in disputes with state regulators who believe the company is running an unlicensed bank.

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