Carl Icahn Seeks PayPal Split in eBay Breakup
Updated from 5:03 p.m. ET to clarify Icahn holdings and eBay response to PayPal proposal.
NEW YORK (TheStreet) - Activist investor Carl Icahn has taken a large stake in eBay
EBay said in a fourth-quarter earnings release that Icahn has nominated two of his employees to the company's board of directors and submitted a non-binding proposal for the spinoff, which would seek to split PayPal off from eBay's online marketplace businesses, which also include ticket re-seller StubHub and fulfillment specialist GSI Commerce .
San Jose-based eBay said Icahn's appointments would be passed onto a nominating committee of the company's board of directors. EBay also disclosed that it has already explored a spinoff or separation of PayPal in an "in depth" manner. Those assessments, however, led the company to believe it was in the best interest of shareholders to keep PayPal intertwined with the larger company.
"Regarding Mr. Icahn's separation proposal, eBay's Board of Directors routinely assesses the company's strategic direction and has explored in depth a spinoff or separation of PayPal," the company said.
"eBay's Board of Directors has concluded that the company and its shareholders are best served by the current strategic direction of the company and does not believe that breaking up the company is the best way to maximize shareholder value. As part of eBay Inc., PayPal is able to leverage the company's technology capabilities, commerce platforms and relationships with retailers, brands and large merchants worldwide," the company added.
Despite previously deciding against a split of PayPal, eBay said it "welcomes the opportunity to listen to the perspective of all of its shareholders, including Mr. Icahn."
According to eBay, Icahn holds an interest in the company's shares of approximately 0.82% through common stock and derivative holdings. Without knowing the mix of shares versus swaps or options that Icahn has purchased it is hard to know Icahn's direct holding of eBay shares. Icahn Enterprises, the holding company majority-owned by Carl Icahn, didn't make any public filings on Wednesday disclosing the size of its eBay investment.
EBay's Savvy Bet on PayPal
PayPal is a bit of a legend in Silicon Valley and has acted as a springboard for the careers of luminaries like Peter Thiel of Accel Partners and Elon Musk, the current CEO of Tesla
In recent years, PayPal has been ballast for eBay's earnings as the company's online marketplace business has struggled. Total revenue for PayPal came in at over $1.8 billion in the fourth quarter and in excess of $6 billion for the full year.