eBay Inc (EBAY) Announced 0.8 Percent, But Icahn Holds 2 Percent

eBay Inc (EBAY) Announced 0.8 Percent, But Icahn Holds 2 Percent
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Carl Icahn has acquired approximately 2% stake in eBay Inc (NASDAQ:EBAY), which is almost twice what the company disclosed a couple of days back, says a report from the Wall Street Journal citing a source aware of the development.

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eBay shares up

While discussing its earnings recently, eBay Inc (NASDAQ:EBAY), disclosed that the activist investor has acquired an 0.82% stake in the San Jose California Company.  In the same conference, eBay also revealed that Icahn wants the retailer to spin-off its payment unit PayPal as a separate company, and has nominated two employees – Jonathan Christodoro and Daniel Ninivaggi – to its board of directors.

Icahn wants eBay to part with PayPal because he believes both the companies would do rapid innovation and implement things faster after they separate from each other. David Marcus, president of PayPal, during the Read Write Mix also expressed somewhat similar thoughts while talking about how to make payment processing company better.

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Shares of eBay surged around 1% to $54.94 on Thursday and increased 16 cents in trading after market’s close. The value of a 2% stake in eBay would be around $1.42 billion based on the company’s market capitalization of $71.13 billion as of Thursday.

Analysts don’t favor Icahn’s views

Earlier, both companies have tried to explain how a spinoff would not be beneficial. The three key reasons: “eBay accelerates PayPal’s success; second, eBay data makes PayPal smarter; and third, eBay Inc (NASDAQ:EBAY) funds PayPal’s growth.”

Most analysts believe that PayPal should not be spun off. According to Morgan Stanley analyst Scott Devitt, “PayPal is the best performing asset, but it owes much of this to its integration with eBay’s other businesses (marketplace and enterprises).”

Similarly BGC Partners analyst Colin Grills said that for commerce and payment, the friction between those two systems should be least, and by spinning off both the companies more friction would be created between them.

For the fourth quarter and full fiscal, PayPal reported a 19% rise in revenue, contributing $6.6 billion to eBay in 2013. The number of active registered users signing in also surged to 5.2 million totaling 143 million for PayPal. Number of transactions in the fourth quarter totaled around 3 billion, which is an increase of 25% in net total payment volume for the quarter.

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Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@valuewalk.com
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