Icahn's Board Nominees Rejected by eBay - Analyst Blog

In a continuation of the scuffle between activist investor Carl Icahn and eBay Inc. EBAY, the latter rejected both of Icahn's nominees for its board of directors.

The activist investor (owns about 2% of eBay stock), Icahn proposed to nominate two of his employees — Daniel Ninivaggi and Jonathan Christodoro — to eBay board. However, the company rejected both the candidates as being unqualified for the position and requested shareholders to vote against them in the next annual meeting.

The dispute between eBay and Icahn started in Jan 2014 after the latter proposed to spin-off PayPal under a different management which would boost both the companies. Also, Icahn accused two eBay board members — VC Marc Andreesen and Scott Cook — of investing in companies that are direct competitors to eBay.

eBay believes that its management team is completely transparent and PayPal is the company's best-performing service and fastest-growing unit. However, it owes a lot of this to the online marketplace. eBay is largely responsible for the success of the online payment service and provides a strong financial base for PayPal's growth.

Moreover, close to one-third of PayPal's new accounts and half of its new mobile accounts come from the online marketplace. Therefore, eBay and PayPal can collectively generate the best value for shareholders.

eBay acquired PayPal in 2002 for $1.5 billion and made further investments to develop it as a strong payments platform. The efforts clearly paid off because PayPal is now the major growth driver and one of the most important reasons for investors' confidence in the company. The growing preference for online shopping has also led to a proportionate increase in the popularity of this online payment service.

Thus, PayPal accounts for a large percentage of eBay's total revenue. Additionally, along with fulfillment services, it enables eBay to provide a complete solution to retailers, whether brick-and-mortar or online.

This makes it an ally of traditional retailers instead of a competitor, further strengthening its position versus Amazon.com Inc. AMZN, and improving its chances of picking up market share.

Currently, eBay holds a Zacks Rank #4 (Sell). Some better-ranked stocks worth considering from the same sector include Liberty Ventures LVNTA, carrying a Zacks Rank #1 (Strong Buy) and Priceline.com Inc. PCLN, carrying a Zacks Rank #2 (Buy).