Billionaire activist investor Carl Icahn is suggesting that eBay Inc (NASDAQ:EBAY) spins off 20% of PayPal in an IPO. He has released a detailed plan for the separation of PayPal and eBay since the beginning of an unsolicited campaign in January.
Through Icahn’s plan, eBay and PayPal would join a commercial agreement to keep working together while selling off only a minority stake of PayPal in the public markets. This would allow PayPal to use its own stock for acquisitions and hiring talent while giving investors a deeper understanding of the company’s value.
“We believe eBay could easily conduct an Initial Public Offering of PayPal, selling 20% to the public. eBay would retain 80% of PayPal with control. Before the transaction is consummated the companies could enter into a long-term, commercially viable contract, preserving all synergies. This type of relationship is customary in partial IPOs and would be particularly important for eBay as currently, outside of PayPal, there does not exist a global payment processing solution competent enough to service eBay?s users. Luckily for PayPal, competitors such as Google, Apple and many others do not yet have the same comparable scale and product offerings,” said Icahn in a statement.