eBay Inc (EBAY) gets accused of conflict of interest by Icahn

Posted Feb 24, 2014

eBay Inc (NASDAQ:EBAY) is being accused of conflict of interest by billionaire activist investor Carl Icahn. Icahn accused eBay CEO John Donahoe of failing to spot or ignoring conflicts of interest on the company’s board of directors.

In the same accusation, Carl Icahn called for the spinoff of PayPal again. Icahn disclosed a 2.15% stake in eBay. Marc Andreessen and Scott Cook, two of the long-term eBay board members, also were named on the conflict allegations.

“How is it possible to engage in meaningful discussions about long-term stockholder value while … the CEO seems to be completely asleep or, even worse, either naive or willfully blind to these grave lapses of accountability and stockholder value destruction?” stated Icahn in a letter to shareholders.

“During Mr. Andreessen’s time on the eBay board he has purchased large stakes in two former eBay subsidiaries, reaping significant personal riches,” wrote Icahn in the open letter.

Icahn said that Andreessen invested in actively advised five direct competitors of eBay, including Boku, Coinbase, Dwolla, Fab, and Jumio. Icahn said that four of these companies are direct competitors of PayPal. Icahn also pointed out that Marc Andreessen bought a stake in Skype before it was acquired by Microsoft. Andreessen and other investors bought Skype back from eBay for a price that is less than what eBay paid. People were critical of the deal, but Icahn pointed out that none have taken on the task of “standing up to Mr. Donahoe and this board.”

Icahn also reported an issue with Andreessen’s investment in online shopping company Kynetic. Kynetic was sold back to its founders at a low sale price in 2011. Andreessen invested $150 million in the company and saw a paper gain of over 100% a year later.

Scott Cook, another eBay board member and founder of Intuit, gave input about the Intuit Go-Payment service. PayPal and Intuit are direct competitors in online payment processing.

“How can the board have a conversation about the strategy or performance of PayPal when a representative of a direct competitor who has so much at stake is in the room?” asked Icahn in the letter.

eBay acquired PayPal for $1.5 billion in 2002 and considered spinning the company off. eBay ended up deciding that PayPal would lose synergies if they went independent.

[Source: BusinessInsider]