Susquehanna Financial Group (SIG) analyst King She analyzes the eBay Inc (NASDAQ:EBAY) board structure and how it will be difficult for Carl Icahn to force a PayPal spinoff in 2014. She has an interesting analysis of the board structure and how it may pose an obstacle for Carl Icahn and his plans.

ebay

There are only 4 board seats up for election this year and the deadline to nominate for board seats was 1/18.  Carl Icahn submitted his 2 names, but this means that he can only get 2 of 11 board seats in 2014.  As such, a PayPal spin this year would require convincing the other board members to do a deal, which we view as unlikely.

At the same time, 2015 will be a different story, as eBay Inc (NASDAQ:EBAY) is in the middle of de-staggering its board, and all 11 board seats are up for re-election.

  • Corporate defense is strong in 2014 but will become weaker in 2015
  • eBay Inc (NASDAQ:EBAY) is in the middle of de-staggering its board
  • Last annual meeting was 4/18/13
  • In 2014, 4 out of 11 directors will be up for re-election
  • In 2015, all 11 directors will be up for re-election
  • Icahn is nominating 2 onto eBay Inc (NASDAQ:EBAY)’s board
  • So, even if Icahn is successful, he will only have 2 out of 11 seats on the board
  • Note that the window to nominate directors has passed (1/18/14)
  • Looks like Icahn beat the deadline, and eBay Inc (NASDAQ:EBAY) only disclosed it last night
  • Potential for Icahn to escalate in 2015 (all 11 directors up for re-election)
  • Special meeting callable by shareholders who own 25% net long position for at least 30 days
  • Difficult as 25% = ~$18bn position
  • Shareholder action by written consent not allowed

eBay’s Certificate of Incorporation

eBay Inc (NASDAQ:EBAY)’s certificate of incorporation.

  • Board vacancies fillable by remaining directors
  • Shareholder action by written consent not allowed
  • Special meeting callable by shareholders who own 25% net long position for at least 30 days

Bylaws

eBay Inc (NASDAQ:EBAY) Inc: bylaws

  • Number of directors shall be one or more
  • Director nomination not less than 90 days nor more than 120 days prior to the one year anniversary of the preceding year’s annual meeting
  • i.e. between 12/19/13 and 1/18/14
  • Provided, however, that if the date of the annual meeting is more than 30 days before or more than 60 days after such anniversary date, notice by the stockholder must be so delivered not earlier than 120 days prior to such annual meeting and not later than 90days prior to such annual meeting or, if later, the 10th day following the day on which public disclosure of the date of such annual meeting was first made
  • Bylaws amendable by 50% shares outstanding