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PayPal files for an IPO

Despite bleak market conditions, the online payment service files to raise $80.5 million in an initial public offering.

Despite bleak market conditions, online payment service PayPal filed to raise $80.5 million in an initial public offering Friday.

For the past 18 months, investors have fled the tech sector, and many analysts are saying that the terrorist attacks on the Pentagon and the World Trade Center earlier this month will drag the economy into a recession. The Nasdaq stock exchange is hovering near its three-year low, and the share prices of most technology companies have plummeted.

A person-to-person payment service that allows people to send money via e-mail, PayPal is a favorite payment method of online auctioneers. According to documents filed with the U.S. Securities and Exchange Commission, 70 percent of PayPal's transaction volume comes from auctioneers, "particularly eBay."

Because eBay operates its own Web payment service, PayPal is in a competitive relationship with the company that hosts most of PayPal's customers.

PayPal recorded revenue just under $20 million for the fiscal quarter ended June 30. During the same quarter last year, PayPal saw $2.1 million in revenue. The company lost $27.6 million during the quarter ended in June, cutting its loss from $47.8 million the same quarter last year.

Salomon Smith Barney, Robertson Stephens and William Blair are the bankers managing the offering for PayPal.

PayPal closed a $90 million round of funding in February. The Series D funding came from foreign banks including Spain's Bankinter and Japanese Internet bank eBank, ING Group, Providian Financial, and leading French retail bank Credit Agricole.

In total, PayPal has raised approximately $225 million in equity financing, including a $100 million Series C round announced in April 2000.

The 2-year-old Palo Alto, Calif.-based company has more than 10 million customers.