eBay, Icahn Cold War Ends - Analyst Blog
The ongoing 4-month cold war between billionaire activist investor Carl Icahn and eBay Inc. (NASDAQ: EBAY) came to an end.
Reportedly, Icahn, who owns 2.15% of eBay, withdrew his campaign to add two of his employees — Daniel Ninivaggi and Jonathan Christodoro — to the eBay Board and divest the PayPal unit. However, eBay will appoint David Dorman, a founding partner of investment firm Centerview Capital Technology, as an independent director to the board at Icahn's suggestion.
However, Icahn still believes that the PayPal spin-off will generate the maximum value for shareholders, but will put his say through private discussions. Although CEO John Donahoe has not made any commitments regarding the separation of its PayPal unit, he has agreed to hold regular discussions with Icahn regarding strategic alternatives.
The dispute between eBay and Icahn started in Jan 2014 after Icahn proposed to spin off PayPal under a different management which would boost both the companies. Also, Icahn accused two eBay board members of investing in companies that are direct competitors to eBay.
The digital payment arm, PayPal, was acquired by eBay in 2002 for $1.5 billion. Since then, it has become the giant marketplace's major growth driver and the actual reason for investors to hold eBay shares. With increasing preference for online shopping nowadays, the use of this online payment service has also risen. Thus, PayPal accounts for a large percentage of eBay's total revenue.
Additionally, PayPal along with fulfillment services, enables eBay to provide a complete solution to retailers, whether brick-and-mortar or online. The unit thus drives eBay's share value.
This makes eBay an ally of traditional retailers instead of a competitor, further strengthening its position versus Amazon.com Inc. (NASDAQ: AMZN), and improving its chances of picking up market share.
Currently, eBay has a Zacks Rank #3 (Hold). Some better-ranked stocks worth considering from the same sector include Liberty Ventures (NASDAQ: LVNTA) and Netflix Inc. (NASDAQ: NFLX), both sporting a Zacks Rank #1 (Strong Buy).
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