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Today Carl C. Icahn released the following open letter to stockholders of eBay Inc. (NASDAQ: EBAY):

We are strongly encouraged by the results published yesterday of an investor survey conducted by Bernstein Research regarding our campaign to prove to eBay's board of directors that stockholders are in favor of separating PayPal from the company.[1] A majority of eBay owners responding to the survey said they believe that the composition of the board should change. 55% of the survey respondents said that the composition of eBay's board should change, while 43% said that splitting PayPal from eBay is the right move to make. We are therefore naturally skeptical of recent articles reporting eBay CEO John Donahoe's claims of widespread stockholder support for keeping the companies together.

While I find the Bernstein data points astounding in light of the fact that we have not yet even begun to formally reach out to our fellow eBay stockholders to make our case, I cannot say that I am particularly surprised at the level of apparent stockholder dissatisfaction with this board – especially in light of (among other things) –

what we believe was an epic blunder in which the board allowed an investor group which included director Marc Andreessen's venture capital firm to capture the lion's share of the enormous upside from Microsoft's acquisition of Skype at the expense of eBay's stockholders;

the fact that during Mr. Andreessen's time on the eBay Board he has made investments in and actively advised, no less than five direct competitors of eBay (four of which are competitors of PayPal), including Boku (mobile payments platform), Coinbase (Bitcoin wallet), Dwolla (secure online money management), Jumio (online and mobile credit card payments) and Fab (design e-commerce); and

the fact that Board member Scott Cook, the founder of Intuit (which competes with PayPal) allegedly asked eBay not to recruit any Intuit employees, according to an ongoing Department of Justice investigation.

I am also not surprised that our spinoff proposal already seems from this survey to have so much support despite the fact that we have not yet even made public our full business rationale for the separation. What I see as some of the obvious potential benefits of a spinoff –

a spinoff of PayPal could eliminate the conglomerate discount that we believe the market has afforded eBay;

a spinoff could allow two separate management teams to focus more closely on the core businesses and make better strategic decisions regarding the long-term health of their respective companies;

an independent PayPal could provide an even more valuable currency for bolt-on acquisitions as PayPal strives to remain the market leader in mobile payments;

a spinoff of PayPal could provide a more compelling currency to attract top talent to the respective companies; and

separately, PayPal may be more able to facilitate strategic partnerships with companies that may now be reluctant to do so due to competitive concerns with eBay –

seem already to be apparent to many, many other eBay stockholders. Again, we are encouraged.

We are looking forward to the upcoming annual meeting, where stockholders will have an opportunity to vote on our precatory proposal and send a message to the board that PayPal should be separated from eBay NOW. Stockholders will also at that time have the power to vote out of office two members of eBay's board of directors and replace them with our nominees, who we believe will be focused more on enhancing value for ALL eBay stockholders than on leveraging their relationships with eBay to benefit their outside personal investments.

Stockholders, please stay tuned. There is more to come – much more. Thank you for your continued support.


Carl C. Icahn

Posted-In: News Hedge Funds General


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