"A lot of people died fighting tyranny. The least I can do is vote against it."
Icahn is unquestionably a thorn in the side of businesses, and a self-appointed champion of the oppressed shareholder. Icahn has also pledged a majority of his wealth to charity. Does this remind you of a certain rebel long-bow specialist who also gave to those in need?
Could Carl Icahn be a modern-day Robin Hood, protecting shareholders from the tyranny of the self-serving CEO? One thing is for sure, Robin Hood was good for the poor, but I'm not so sure how good Carl Icahn is for shareholders.
With that in mind, I want to look into some of Icahn's more recent "activities" with Chesapeake Energy (NYSE:CHK) and Apple (NASDAQ:AAPL) to determine if we should trust his judgement in regards to eBay (NASDAQ:EBAY).
Icahn vs. Chesapeake Energy
In 2012, Icahn explained that his draw to Chesapeake Energy was simple, "Chesapeake has collected some of the best oil and gas assets in the world." Sounds like a moat to me. What's the problem?
Icahn suggested poor management has led to, "an astounding $16 billion funding gap, which we believe has contributed to the share price decline of over 55%." Yikes!
According to Icahn the solution was to have direct shareholder representation on the board. Not a crazy idea, but one Chesapeake management was prepared to fight tooth and nail. Icahn won the vote, and eventually CEO McClendon resigned. He stated having a difference in philosophy with the board as the reason for his exit.
Since Icahn intervened around May of 2012 the stock price has almost doubled. The company is selling non-core assets, the funding gap has been significantly closed, and it's well on its way to a funding surplus. Overall, Chesapeake Energy is a stronger business since Icahn arrived.
Icahn vs. Tim Cook
Earlier this year, Icahn said Apple is a "no brainer" investment. Noting that Apple is one of the most innovative products companies, it has a loyal customer base, one of the strongest brands in the world, and has a history of strong growth.
The problem is management was hoarding cash -- according to Icahn, $130 billion of net cash. Apple CEO Tim Cook explained that the, "rapid pace of innovation require[s] unprecedented investment, flexibility and access to resources."
In some respects Cook is absolutely correct. Though, in my opinion, holding that amount of cash is unacceptable. The money should have been put to work or given back to shareholders -- Cook knew it and Icahn knew it.
In fact, Apple was already planning a large share buyback. According to Icahn, however, the figure was far too low.
Apple went on to buy back $14 billion worth of shares in two weeks. Considering the company was on pace to buy back nearly $32 billion in shares, Icahn has rescinded his proposal. Score another one for Icahn and shareholders.
Icahn vs. eBay
The pull to eBay was clear. The company has "great long-term value" -- with the catch, in Icahn's opinion, of a "complete disregard for accountability [...] the most blatant we have ever seen."
So far there's been a proposal from Icahn to spin-off PayPal. Which eBay considered, but suggested that both companies benefit from a combined effort. This was followed by several chippy back and forth letters between Icahn and eBay's public relations.
Right now there's a lot of noise and a lot of hearsay. All of which is fantastically entertaining, but completely beside the point. This whole engagement started over whether or not PayPal belongs inside of eBay -- and I believe that's where our attention belongs.
In Icahn's first letter he quoted PayPal's founder Elon Musk, who suggested "it doesn't make sense that a global payment system is a subsidiary of an auction website... it's as if Target owned Visa or something."
In response, eBay noted that PayPal is able to leverage eBay's technology and relationships with retailers. Its clear PayPal has benefited from the warmth and support of eBay, but it's time for PayPal to spread its wings.
As Icahn suggested, the split will allow both businesses to shed the conglomerate discount valuation, and empower management to more effectively manage two very different business models. Making financial decisions specific to what's best for each individual business.
The Robin Hood of finance
While this situation is shrouded in shades of gray, I'm siding with Carl Icahn. Not only has Icahn proved his value to shareholders -- and perhaps this is selfish of me -- but I'm much more interested in owning the PayPal business than the eBay business.
While there's stiff competition in the payments industry, I would rather see PayPal fail on its own, than as Elon Musk suggested, "wither" inside of eBay.