Carl C. Icahn has lost the battle of bluster at eBay. The activist investor is quitting his proxy fight now that the company is appointing one new director and agreeing to talk to him. Considering that Mr. Icahn had “never seen worse governance†and was broadly right about the benefits of eBay separating its PayPal unit, that’s a retreat. But he may yet win the war.
Mr. Icahn went in hard, pulling no punches with his allegations of conflicts of interest on the part of some eBay board members. One was Mark Andreessen, whose venture capital firm’s participation in the $2.75 billion buyout of Skype from eBay carried the tang of conflict â€" although the company and Mr. Andreessen said that such matters were handled appropriately.
More important, Mr. Icahn’s push for a spinoff of PayPal makes financial sense, as Breakingviews has argued over the years. Though some of the online payment unit’s new customers come via eBay’s auction business, an increasing majority originates from outside its walls. Separating the two â€" perhaps partially to begin with â€" could boost PayPal’s growth prospects and its value.
The company came out swinging, too. Pierre Omidyar, eBay’s founder and holder of a stake almost four times larger than Mr. Icahn’s 2 percent, said the advocate’s attacks were misleading. The company pointed to PayPal’s 40-fold growth in mobile payments over the past three years as evidence that eBay’s ownership helped rather than hindered the business.
Mr. Andreessen also counterattacked almost daily on Twitter. In one instance, he pointed out that in connection with a different situation Mr. Icahn had said conflicts of interest were endemic in technology and health care boardrooms and easily managed through recusal.
The appointment of David Dorman, currently chairman of CVS Caremark, as another independent director at eBay and the promise by eBay’s chief executive John Donahoe to talk to Mr. Icahn are small reward considering the gravity of the investor’s allegations. But Mr. Icahn says he will continue to press for the spinoff of PayPal.
The company doesn’t believe now is the time, but has not ruled it out forever. More talk from Mr. Icahn â€" albeit behind closed doors â€" and heightened scrutiny from independent board members and shareholders could bring the day closer.
Robert Cyran is a columnist for Reuters Breakingviews. For more independent commentary and analysis, visit breakingviews.com.
