Now entering a third month, hostilities between activist investor Carl Icahn and eBay
(NASDAQ:EBAY), his latest target, have escalated into open warfare.
Mercifully, this is a thoroughly modern war of emailed memos to stockholders, open letters, and blog posts. It's all right, folks. It's only money.
It's more than all right, in fact. It's a lot of fun, as the two sides pepper each other in public with offensive references to Joseph Stalin and Lex Luthor. A long-forgotten association with Ivan Boesky has even been recalled, pointedly.
If we're lucky, this will keep going until sometime in May, when it will culminate in an epic battle at eBay's annual shareholders meeting.
But that showdown has yet to be scheduled. So, here's a summary of where we are now with all the major players, complete with cameo appearances by a big-shot capitalist and a technology luminary.
(All comments are paraphrased except where denoted by quotation marks.)
Carl Icahn: John Donahoe has demonstrated "inexcusable incompetence" as CEO of eBay.
eBay: The company's stock has quadrupled since Donahoe took over in 2008. Got a problem with that?
Icahn: I now own 2.2% of eBay, so I want two of my employees to be placed on the board of directors.
Carl Icahn: eBay's fast-growing PayPal electronic-payments division must be spun off as a separate company in order to fully realize its investor value.
eBay: PayPal is growing fast by piggybacking on its parent company, the giant electronic marketplace eBay. It became the default payment option for $200 billion per year in goods bought on eBay, at zero acquisition cost. It continues to benefit from the shared-data services and financial support of its parent.
Carl Icahn: About "the Skype affair": eBay's board of directors sold the company's Skype unit to a consortium whose members included a company owned by an eBay board member, Marc Andreessen of Andreessen Horowitz. Just 18 months later, the consortium flipped Skype for a $4 billion profit that should have gone to eBay shareholders.
Or, to quote Icahn directly from his latest missive (the caps are his):
"THESE TYPES OF SHENANIGANS MAY FLY IN COUNTRIES WHERE DECISIONS AFFECTING MILLIONS OF PEOPLE'S LIVES ARE MADE IN SECRET POLITBURO MEETINGS. BUT I BELIEVE ONE OF THE THINGS WHICH MAKES OUR COUNTRY THE GREATEST ON EARTH IS OUR DEMOCRATIC FORM OF GOVERNMENT, WHERE DELIBERATIONS ARE CONDUCTED IN THE LIGHT OF DAY..."
Just in case anybody missed the message, Icahn repeated the Politburo metaphor in a later interview, adding a reference to Soviet dictator Joseph Stalin. Marc Andreessen weighed in on the discussion of shenanigans.
Marc Andreessen: I recused myself from the Skype discussion. And, speaking of shenanigans, weren't you a good buddy of convicted insider-trading villain Ivan Boesky back in the 1980s?
Carl Icahn: Let's get back to PayPal. A PayPal spin-off would spur huge interest and boost stock value. It's a simple process of eliminating the "conglomerate discount."
eBay: "The Board has carefully considered this proposal and has unanimously agreed that spinning off the Payments segment (PayPal) into a separately traded public company would not be in the best interests of eBay or its stockholders."
Former PayPal executive Reid Hoffman, now CEO of LinkedIn
(NYSE:LNKD), said in a blog post: "
While EBay is no longer a start-up, it still has massive growth prospects. But to someone who isn't investing in the long term, it's just a cash cow that's ready to be slaughtered." Icahn, says Hoffman, is just out to "make a quick profit on that PayPal premium."
And here's where Lex Luthor comes into the story: "While this has made for lively if unconvincing theater -- in Icahn's imagination, Andreessen has almost Lex Luthor-like powers to control the minds of others -- it doesn't qualify as a long-term strategy."
William Smead, CEO of Smead Capital Management, wrote in an open letter to Carl Icahn: "While we agree that spinning out PayPal would give the company a short-term boost in stock price, we believe it will get in the way of all the money that John Donahoe and his team can make us over the next 10 to 20 years." Ichan wasn't going to let it drop.
Carl Icahn: You are going to get so scroogled if you don't listen to me. PayPal will fall by the wayside, like once-great companies Eastman Kodak, Xerox and Palm. It will starve and dwindle, and then Google (NASDAQ:GOOG) will buy it for a song.
Donahoe, in an internal company video, try to take the attention off of Icahn's calls for action.
Donahoe: "The noise is going to get louder over the next four to six to eight weeks. Don't pay attention to the noise. Stay focused, and don't be distracted."
No positions in stocks mentioned.
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