March 11 2014 The Battle For PayPal’s Future| PYMNTS.com eBay Inc.’s board of directors have been in a pitched battled with activist investor Carl Icahn.
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The Battle For PayPal’s Future| PYMNTS.com
eBay Inc.’s board of directors have been in a pitched battled with activist investor Carl Icahn.
As insults and accusations have flown, and more players have stepped up to be heard in the dispute over the future of eBay Inc.’s Payments Arms, it can be hard to keep track of who is say what about who.
Pymnts presents the high-(and-low)lights over the PayPal Proxy Fight over the last month-and-a-half
Investor Carl Icahn formally requests consideration for a move to split of payments service PayPal from parent companyt eBay Inc. He also makes public his intention to place two business associates on eBay’s board of directors
Icahn earlier in the month acquired shares and derivative securities that give him an economic interest of approximately 0.82% in eBay, the company reported
eBay publically acknowledges investor and shareholders’ rights advocate Carl Icahn’s suggestion that eBay inc. should spin-off PayPal should be to maximize shareholder value.
“We have tremendous respect for Mr. Icahn, so if he wants to talk with us, we’re happy to listen—just like we’ll do with all of our shareholders. Spinning off PayPal as a separate company from eBay Inc. is not a new idea. In fact, eBay’s management team and board routinely explore all of the company’s strategic options. And based on everything the company and board see today, we continue to believe that shareholders and customers are best served by keeping PayPal and eBay together.”
-Source: eBay Blog
eBay Stock spikes in response to Icahn proposal. Shares of the online retailer jumped higher after the online auction website revealed Icahn’s break-up proposal
“eBay is a big contributor to PayPal's growth and expansion," eBay CEO John Donahoesaid in a call with investors before the news broke
Source: CNN Money
Icahn fires back in an open letter to stockholders, reiterating the shareholder value in splitting off the payments arm of eBay Inc. He also excoriates eBay’s board as being rife with conflicts of interest – particularly board members Marc Andreesen and Scott Cook.
“…After diligently researching this company we have discovered multiple lapses in corporate governance… We have found ourselves in many troubling situations over the years, but the complete disregard for accountability at eBay is the most blatant we have ever seen. Indeed, for the first time in our long history, we have encountered a situation where we believe we should not even have to run a proxy fight to change the board composition. Rather, we believe that in any sane business environment these directors would simply resign immediately from the eBay Board, either out of pure decency or sheer embarrassment at the public exposure of the extent of their self-serving activities.
Source: Carl Icahn Open Letter
eBay responds to Icahn, asserts their internal process for dealing with potential conflicts and reiterates the boards commitment to leaving eBay and PayPalc connected.
“New eBay shareholder Carl Icahn has cherry-picked old news clips and anecdotes out of context to attack the integrity of two of the most respected, accomplished and value-driven technology leaders in Silicon Valley. Marc Andreessen and Scott Cook bring extraordinary insight, expertise and leadership to eBay’s board, which is scrupulous in its governance practices and fully transparent with regard to its directors’ other affiliations and businesses.”
Source: eBay Blog
Carl Icahn releases another open letter addressed to stockholders. Icahn renewed his complaints about Marc Andreessen and Scott Cook’s presence on the board, and urged for their removable due to conflicts of interest.
“The point is that because of the multiple hats they wear and a number of their actions, we believe that eBay directors Mr. Marc Andreessen and Mr. Scott Cook have clear conflicts which call into question whether they can adequately fulfill the duty of loyalty that every director owes to ALL eBay stockholders.”
Source: Carl Icahn, Open Letter
eBay’s Board Chairman, founder and largest shareholder Pierre Omidya responds to Icahn in a statement.
“Instead of having an honest discussion about a reasonable question, Mr. Icahn has chosen to attack the integrity of two highly respected and qualified board members, Scott Cook and Marc Andreessen. He also has attacked the integrity of our CEO John Donahoe.
Mr. Icahn’s attacks are false and misleading.”
Source: Pierre Omidya’s statement
LinkedIn co-founder Reid Hoffman weighs into the looming proxy fight with support for eBay’s embattled board and CEO.
“To me, what’s most interesting about this story is the light it sheds on the clash of values between Icahn’s Wall Street world and the culture of Silicon Valley.
…The fabled Eureka moments may lead to product breakthroughs. But they rarely lead to fully formed products, and they never lead to mature and fully formed businesses.
Innovation comes from long-term thinking and iterative execution.”
Source: Reid Hoffman LI Blog
Marc Andreessen rises to his own defense, and accuses Mr. Icahn of hypocrisy in his newly acquired standards on conflicts of interest…
Carl Icahn 2014, on eBay:
“I have never seen what looks to me to be such blatant disregard for fiduciary obligations to stockholders.” (1)
Carl Icahn 2005, according to the Washington Post: (2)
Carl Icahn is chairman of the board of XO and owns more than 60 percent of the company, a telecom-crash survivor that provides telephone and data communications services for businesses, using conventional wires and new-generation wireless hookups.
Source: Marc Andreessen Blog
eBay’s Board of Directors rejects Icahn’ handpicked selections for board two seats. Icahn’s choices were reportedly rejected for not being experienced enough.
“John’s track record of success at eBay, driving the company’s turnaround and growth, is well documented,” the said eBay’s board in a released statement. “Yet in pursuit of his own profit motives, Carl Icahn has made another unsubstantiated attack on John. Just like his previous ones, this attack is false and misleading and has already been utterly discredited by the facts.”
Icahn releases another open letter following the board’s decision, lambasting eBay’s culture of incompetence and predicting a grim future for PayPal
“However, on the other hand, I fear that if left under the management of eBay it (PayPal) will “wither” (as Elon Musk said). I believe that if it is left as a division of eBay, PayPal may well go the way of other former technology greats such as Blackberry, Dell, Eastman Kodak, Polaroid, Nintendo, Xerox, Sony, Palm, and AOL – the same way that Motorola Mobility may have gone had we not been able to convince Motorola’s board to bring in a new CEO and separate the companies – ultimately resulting in a sale to Google.”
Source: Carl Icahn Open Letter
Icahn has a changes tacks, and advocates for a partial IPO of PayPal that would still leave the majority of the company under eBay’s control.
“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. A 20% IPO of PayPal could allow for all of the benefits of an independent PayPal, preserves all of the benefits of keeping PayPal in-house and could be structured so as to be tax free to shareholders…”
Source: Carl Icahn Open Letter
eBay’s welcome’s Icahn’s change of proposal
“A partial separation of PayPal is not a new idea, and we’re glad to see that Mr. Icahn now seems to agree that a full separation of PayPal is not a good idea,”