In 2005, PayPal acquired the VeriSign payment solution to provide added security support. PayPal became the default payment method used by the majority of eBay users, and the service competed with eBay's subsidiary Billpoint, as well as Citibank's c2it, Yahoo!'s PayDirect, and Google Checkout. More than 70 percent of all eBay auctions accepted PayPal payments, and roughly 1 in 4 closed auction listings were transacted via PayPal.

Shortly after PayPal's IPO, the company was acquired by eBay on October 3, 2002, for $1.5 billion in eBay stock. PayPal's IPO listed under the ticker PYPL at $13 per share and generated over $61 million. That same month, Elon Musk was replaced by Peter Thiel as CEO of X.com, which was renamed PayPal in 2001 and went public in 2002. In October of that year, Musk decided that X.com would terminate its other internet banking operations and focus on PayPal. Musk and Bill Harris, then-president and CEO of X.com, disagreed about the potential future success of the money transfer business and Harris left the company in May 2000. Musk was optimistic about the future success of the money transfer business Confinity was developing. In March 2000, Confinity merged with x.com, an online financial services company founded in March 1999 by Elon Musk, Harris Fricker, Christopher Payne, and Ed Ho. The first version of the PayPal electronic payments system was launched in 1999. Having had no success with that business model, however, it switched its focus to a digital wallet. PayPal was originally established by Max Levchin, Peter Thiel, and Luke Nosek in December 1998 as Confinity, a company that developed security software for hand-held devices.

For a chronological guide, see Timeline of PayPal.

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