NEW YORK, N.Y. – EBay and activist shareholder Carl Icahn are continuing their war of words over PayPal.
The billionaire has been pressuring the e-commerce company to spin off the online payment business. But eBay has said it’s not interested in separating its fastest growing segment.
On Monday, Icahn said in a blistering letter to shareholders that eBay’s “complete disregard for accountability at eBay is the most blatant we have ever seen” and called out two directors and the CEO specifically for “lapses in corporate governance.”
EBay responded that that it continues to believe stockholders are best served by keeping PayPal as part of the company.
PayPal, which eBay bought for $1.3 billion in late 2002, is now growing faster than the company’s core marketplaces business. In the fourth quarter, payments revenue of $1.84 billion accounted for about 41 per cent of total revenue for the period. Recently, PayPal has been expanding into brick-and-mortar stores from serving solely as an online payments service.
In January, EBay said Icahn had taken a less than 1 per cent stake in the company and said he was seeking a non-binding shareholder resolution to spin off PayPal. At the time Icahn also nominated two of his employees for eBay’s board. EBay said then that it had looked into a split from PayPal, but felt it wasn’t the best move for shareholders. But it said it will review Icahn’s nominees.
In his letter Monday, Icahn also alleged that some eBay board members have conflicts of interest. Among those to catch Icahn’s fire: Scott Cook, who is the founder and former CEO of Intuit Inc. and is a current board member for the company. Icahn questioned Cook’s involvement on the eBay board, saying that Intuit and PayPal are direct competitors. Icahn also questioned Marc Andreessen’s loyalty to eBay, claiming he was able to achieve significant personal financial benefit from buying large stakes in two former eBay subsidiaries.
Icahn also drubbed eBay CEO John Donahoe, saying he seems “completely asleep or, even worse, either naive or wilfully blind to these grave lapses of accountability and stockholder value destruction.”
EBay said Cook, Andreessen and Donahoe were unavailable for individual comment. But in a statement, the company said its board is “scrupulous in its governance practices and fully transparent with regard to its directors’ other affiliations and businesses.”
Stifel Nicolaus analyst Jordan Rohan said he believes Icahn’s attempts for the spinoff won’t go anywhere.
“The entire board believes whole-heartedly they’re acting in the best interest of shareholders,” to keep PayPal part of EBay, he said.
EBay shares rose $1.71, or 3.1 per cent, to $56.30 in afternoon trading Monday. Its shares are up more than 2 per cent for the past year.