In an open letter to eBay Inc (NASDAQ:EBAY) shareholders published today, activist investor Carl said he initially amassed his position in the stock because he saw “great long-term value” in it. However, he says now that they’ve uncovered some major corporate governance concerns and believes that every member of the auction site’s board ought to resign immediately.
Although (or perhaps because) Icahn has expressed his dissatisfaction with eBay Inc (NASDAQ:EBAY)’s board of directors, shares of the company rose nearly 4% in midday trading.
Icahn highlights conflicts of interest at eBay
According to Icahn, the conflicts of interest held by each member of eBay Inc (NASDAQ:EBAY)’s board of directors are so egregious that “in any sane business environment,” they would resign immediately, “either out of pure decency or sheer embarrassment at the public exposure of the extent of their self-serving activities.
He said at least two of the company’s board members are in direct competition with eBay Inc (NASDAQ:EBAY) in their own businesses. He believes one wants the company to “cease hiring the most talented employees,” while another is “routinely funding competitors while buying companies from eBay and reaping significant personal riches.” He also states that at least two of them seem to have conflicts between their own financial gains and their fiduciary responsibilities to eBay and that the company’s CEO seems to be asleep at the wheel, naïve or willfully blind.
Andreessen, Cook named in open letter
Specifically, Icahn targets Marc Andreessen and Scott Cook. He pointed to Andreessen’s purchase of 70% of Skype from eBay Inc (NASDAQ:EBAY) for less than what the company purchased it. He was part of a group which preempted the planned initial public offering for Skype and then sold it to Microsoft Corporation (NASDAQ:MSFT) for three times what they paid for it. He also points to Andreessen’s investment in Kynetic and his investments in and advice given to five of eBay’s direct competitors, four of which compete with the company’s subsidiary PayPal.
Cook founded and is the former CEO of Intuit, on which he currently serves on the board. Intuit competes with PayPal in the payment processing business. In addition, he points to a complaint which is depending with the Department of Justice which indicates that Cook complained and nearly forced eBay Inc (NASDAQ:EBAY) to expand its no-solicitation and no-hire agreement. Under that agreement, eBay agreed not to pursue any of Intuit’s employees and to throw away the resumes submitted by any Intuit employees.
Is Donahoe asleep at the wheel?
Meanwhile, eBay Inc (NASDAQ:EBAY) President and CEO John Donahoe has been praising his board of directors. He also praised the sale of Skype, but Icahn suggests that the deal cost eBay shareholders more than $4 billion. In addition, Icahn said shares of eBay have underperformed compared to its peers since Donahoe took the helm.
Icahn notes also that PayPal founders Elon Musk and David Yammer are openly questioning Donahoe’s strategy of keeping PayPal a subsidiary of eBay—something that’s been debated for some time now.
Icahn makes suggestions for eBay
Of course Icahn has some suggestions for how to fix these problems at eBay Inc (NASDAQ:EBAY). He again reiterates his desire to see PayPal spun off as a separate company. He also urges shareholders to vote for his slate of director nominees and his non-binding proposal that eBay spin off PayPal as soon as possible.