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Carl Icahn Starts Getting Realistic on eBay and PayPal Ambitions

Jon C. Ogg

Carl Icahn is not an activist investor who gives up easily. Nor does he give up without a fight. When it comes to his stance on eBay Inc. (EBAY), however, Icahn might be starting to understand that his fight to remove board members and to get a spinoff of PayPal is becoming futile.

Icahn issued a statement yet again on Wednesday via his Shareholders' Square Table with a call for eBay to listen. He simply suggests that an initial public offering of 20% of PayPal would make sense. This would effectively create a tracking stock.

It was just this week that eBay pointed out that Icahn's value efforts crushed the former airline of TWA. By coming out with a proposal now of creating only a 20% stake IPO, it sure looks like Icahn is starting to move on down the road.

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Excerpts of Icahn's statement said:

We believe eBay could easily conduct an Initial Public Offering of PayPal, selling 20% to the public. eBay would retain 80% of PayPal with control. Before the transaction is consummated the companies could enter into a long-term, commercially viable contract, preserving all synergies. ... Luckily for PayPal, competitors such as Google, Apple and many others do not yet have the same comparable scale and product offerings, ... We believe conducting a 20% IPO of PayPal -- and creating two dedicated and highly-focused independent businesses -- will provide the best opportunity for these businesses to remain competitive over the long-term. The 20% IPO structure should alleviate any concern of lost synergies. All of the "secret sauce" and "flywheels" would be preserved ...

Icahn also has a bullet list and supporting materials provided as well, in quite a lengthy presentation. The main points, without the long summaries on each, were as follows:

  • Highlights value
  • Focuses management teams
  • Creates a valuable currency for acquisitions and attracting top talent
  • Prevents dissynergies
  • Preserves current synergies
  • Extends PayPal's product offerings
  • Allows for true "world-class" boards

Again, this seems like the beginning stages of an admission that his efforts are falling on deaf ears. Sometimes billionaires have the same problem as the rest of us -- they just cannot get people to do what they want them to do.

eBay insiders and many outsiders are pressing back against Icahn's attempt to bust up the company to unlock value. It turns out that creating value today might not be worth as much as business models and the business climates change through time.

eBay shares were up 0.2% at $57.97 in mid-afternoon trading on Wednesday, against a 52-week range of $48.06 to $59.70. The consensus analyst price target on eBay is just above $63.

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