By Sneha Shankar - In a harshly worded letter dispatched to shareholders of eBay (NASDAQ:EBAY) on Monday, billionaire activist investor Carl Icahn criticized the Internet company's management and its board over various aspects of corporate governance.
"The complete disregard for accountability at eBay is the most blatant we have ever seen. Indeed, for the first time in our long history, we have encountered a situation where we believe we should not even have to run a proxy fight to change the board composition,” Icahn wrote in the open letter, and reiterated his demand that eBay should spin payment gateway PayPal off into a separate company.
EBay fired off a quick response to Icahn's letter, defending board members Marc Andreessen and Scott Cook, whom Icahn had singled out for criticism in the letter for investing in companies such as Boku, Bitcoin Wallet Coinbase, and Intuit, all of which, he said, compete directly with eBay.
“New eBay shareholder Carl Icahn has cherry-picked old news clips and anecdotes out of context to attack the integrity of two of the most respected, accomplished and value-driven technology leaders in Silicon Valley,” the company statement said, adding: “The overlap between Intuit and eBay is small, fully disclosed and within the SEC safe harbor for interlocking directorates."
Icahn also went after eBay CEO John Donahoe stating that Donahoe was “feeding information to competitors on the eBay board” and appeared to “lack awareness about what is going on around him.”
“The CEO seems to be completely asleep or, even worse, either naive or willfully blind to these grave lapses of accountability and stockholder value destruction,” Icahn said in the letter.
According to Icahn, eBay's board consists of two directors who hold stakes in companeies directly competing with eBay and another demanding to cease hiring at eBay. Icahn also accused other board members of funding competitors and looking for personal gains at the expense of eBay's shareholders.
"Regarding hiring, this is old news, any restrictions ended years ago, and Intuit historically had not been a source of talent for eBay Inc,” eBay's statement said.
Icahn also raised fingers at Andreessen’s support for the company's acquisition of Skype and its subsequent sale to Microsoft for $8.5 billion. He stated that the transaction had cost the stockholders hugely and only benefited private equity firms to the tune of $4 billion.
The 77-year-old billionaire, who owns more than 2 percent of eBay and put two of his own employees on its board last month, also questioned Cook’s stake in Intuit, a competing business with PayPal in which Cooke has a stake worth $1 billion.
“How can the board have a conversation about the strategy or performance of PayPal when a representative of a direct competitor who has so much at stake is in the room? Even worse, Mr. Cook also apparently believes he can tell eBay whom the company cannot hire,” Icahn wrote in the letter.
Icahn also renewed his calls for the company to split PayPal and eBay into two separate companies and asked shareholders to vote for the two directors appointed by him to the board because eBay needs “fresh stockholder representation on the board to steer it towards long-term success and away from becoming yet another example of a technology company with a management team and board that refused to adapt.”
According to Forbes, PayPal’s co-founder Elon Musk also supports the plan to separate the two companies.
“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,” Musk said, according to Forbes. If PayPal were to be made a standalone business it could eventually have a valuation of $100 billion, according to Musk.
EBay's stock closed 3.13 percent higher on Monday.