Carl Icahn Goes On The Offensive Against eBay

Carl Icahn, eBay’s most vocal shareholder, continues his crusade for change at the online auction giant.

Feb 27, 2014 at 8:00PM

Activist investor Carl Icahn is no shrinking violet.

The investing public has watched as Mr. Icahn has waged highly publicized campaigns against the likes of Apple, Dell, and many more over the years. And while he might not always achieve his ultimate goals, his returns are hard to overlook. According to one source, Icahn's 2013 activist campaigns alone on average generated a 40% annualized return for those investing alongside him.

More recently, Icahn has set his sites on online auction dynamo eBay (NASDAQ:EBAY) for his next high profile crusade. And this week, he escalated his attack on eBay by shifting his focus to another aspect of its business – its directors.

eBay vs Icahn – Round 1
Late last month, Icahn announced he had established a 2% stake (around $1.5 billion) in the online auction company along with a call for eBay to spinoff its highly coveted online payment processing unit PayPal. He further maintained that he was ready for yet another proxy fight against eBay in hopes of landing two board seats for his representatives as well. 

Carl Icahn Twitter Pic

Source: Twitter

eBay's management team quickly rebuffed Icahn's proposal, as it has with the multitude of other financial analysts that have lobbied in favor spinning off PayPal over the years. eBay CEO John Donahoe quickly took the eBay's corporate blog to defend his position, arguing unsurprisingly that "we continue to believe that the company, our customers, and our shareholder are best served by keeping PayPal and eBay together." 

Donahoe returned to the consistent argument in favor of keeping eBay and PayPal under a single corporate fold, namely that eBay and PayPal offer to strong of synergies to merit their separation. And while synergies have been used as the rationale for more bad corporate deal-making than perhaps any other, it certainly makes sense that an auction company like eBay, where lots of commerce takes place, could make a disproportionate amount of money by funneling the payment for those auctions toward a payment company is too owns.

However, this explanation failed to satisfy the likes of Carl Icahn who chose to pursue a different tactic in his next attempt to cajole eBay into action.

Round 2: Mudslinging
Apparently unsatisfied with his lack of progress, Icahn published three open letters this week decrying the behavior of eBay's board of directors.

Icahn's criticism focuses on the board's activity with two of its own – venture capitalist Marc Andreessen and Intuit (NASDAQ:INTU) founder and board memeber Scott Cook. To be fair, Icahn raises several interesting issues regarding the boards behavior.

Regarding Mr. Andreessen, one of the most widely admired venture capitalists in the business, Icahn calls into question the circumstances surrounding eBay and Mr. Andreessen's dealings with Skype. Mr. Andreessen became an independent director on eBay's board in September of 2008 , nearly found years after eBay acquired Skype for $2.5 billion . One year later in September of '09, a group of investors including Mr Andreessen's VC firm Andreessen Horowitz agreed to acquire 65% of Skype from eBay in a deal that valued the online calling platform at $2.75 billion. Then in mid-2011, Skype was ultimately sold to Microsoft for a whopping $8.5 billion.

It's easy to see how one could call into question the intimate and highly profitable involvement Mr. Andreessen had with the multiple Skype deals. And, it's this fact seeming conflict of interest that has Mr. Icahn crying afoul. In his eyes, Andreessen made huge sums front-running an inevitable acquisition of Skype, costing eBay investors billions in potential gains.

In the case of Mr. Cook, Icahn notes that Intuit and PayPal compete nearly directly. Mr. Cook is the fourth largest shareholder at Intuit, where his 4.65% at the end of last year was worth a whopping $1 billion. Icahn cites PayPal's PayPal Here product contends directly with Intuit's GoPayment product. He claims, also understandable, that Cook's access to PayPal's intimate operational details could provide a meaningful advantage for Intuit in market where the two compete and the potential for meaningful monetary gain for Mr. Cook.

Moving on to the middle rounds
Mr. Icahn certainly raises some fair questions with these letters, although no one has accused either Mr. Andreessen or Mr. Cook of any wrongdoing in relation to their activities as eBay board members. Cleary, the matchup between Icahn and eBay's board is in the early innings, so expect more fireworks in the weeks to come.

However, whether or not Mr. Icahn will be able to effect any real change at eBay remains far from a sure thing today.

Forget eBay, invest in tech's next trillion dollar revolution
Let's face it, every investor wants to get in on revolutionary ideas before they hit it big. Like buying PC-maker Dell in the late 1980's, before the consumer computing boom. Or purchasing stock in e-commerce pioneer in late 1990's, when they were nothing more than an upstart online bookstore. The problem is, most investors don't understand the key to investing in hyper-growth markets. The real trick is to find a small-cap "pure-play", and then watch as it grows in EXPLOSIVE lock-step with it's industry. Our expert team of equity analysts has identified 1 stock that's poised to produce rocket-ship returns with the next $14.4 TRILLION industry. Click here to get the full story in this eye-opening report.

Andrew Tonner owns shares of Apple and eBay. The Motley Fool recommends Apple, eBay, and Intuit. The Motley Fool owns shares of Apple, eBay, and Intuit. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.

Compare Brokers