Mechanism
Conglomerate Discount
TL;DR
Markets value diversified companies below the sum of their parts if operated independently.
PayPal as an independent company would command a $45-50B valuation. As eBay's subsidiary, the market valued it at $30B. The conglomerate discount was destroying $15B+ in shareholder value.
N/A - This is a business/finance concept without direct biological analog in this chapter.
Business Application of Conglomerate Discount
Markets value diversified companies below the sum of their parts if operated independently. By 2010, investors preferred pure-plays (companies focused on a single industry) over conglomerates. GE's sum-of-parts valuation exceeded its market cap, destroying value. The eBay/PayPal conglomerate discount was destroying $15B+ in shareholder value before the spinoff.