Icahn: A Partial IPO of PayPal Would Be Best for Ebay

Carl Icahn, Herbalife, Netflix

Activist investor Carl Icahn has called upon eBay Inc. (NASDAQ:EBAY) to sell around 20 percent of its PayPal unit to public investors; Icahn has been publicly feuding with eBay for weeks now. His current demands are a step back from previously when the investor pressed the company spin off PayPal entirely, calling for a complete separation of the two businesses, according to a Reuters report Wednesday.

“PayPal is a tremendous company, but it is on the verge of going to war against strong adversaries, and only with the benefits of being an independent company … will PayPal be capable of winning that war,” he said in a blog post Wednesday.

According to Icahn’s blog, partially divesting PayPal would highlight the company’s value whilst forcing the unit’s management to focus more on day-to-day operations. He added that eBay and PayPal should have separate boards in order to avoid conflicts of interest, according to a New York Times report.

Previously Icahn has argued that eBay’s board isn’t serving its shareholders as well as it should; naming names of chairpersons who he says are particularly responsible. Venture capitalist Marc Andreessen and Intuit’s chair Scott Cook, he said, have conflicts of interest.

“Conducting a 20 percent 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,” Icahn added, per Reuters.

The activist investor also claims that a 20 percent IPO, partially separating the two companies would allow PayPal to expand its services, thereby allowing it to better compete with upcoming rival companies which offer similar services. “We believe PayPal has significant opportunity to expand its product offerings to include check writing and direct deposits, interest on PayPal balances and other financial conveniences that consumers expect … we believe that focus from a dedicated management team, unencumbered by competing agendas, could drive more innovation at a faster pace,” Icahn said.

EBay has since responded to Icahn’s latest series of statements and criticisms, ”a partial separation of PayPal is 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,” an eBay spokesperson said, adding that, “Our board regularly evaluates strategic options for the company.”