The latest update in the ongoing cold war between billionaire
activist investor Carl Icahn and
) is that Icahn has advised the giant online marketplace to spin
off 20% of PayPal in an Initial Public Offering (IPO). This
follows his proposal of a complete spinoff of PayPal with a
different management team, which was rejected by eBay.
Icahn's earlier proposal of a spinoff fell flat and he doesn't
seem inclined to bow out easily. Therefore, his latest call is
not a withdrawal but just a smart modification of his previous
offer of separation of the two businesses. Alas, he faces a
rejection yet again.
According to Icahn, eBay and PayPal's association shadows
their individual market value. In comparison to companies like
), eBay lags both in terms of worth and accomplishments.
Per Icahn, the proposed partial spinoff will increase the
equity holder's base and help them to remain competitive in the
long run, thus boosting the progress of both the companies. He
also suggested that the two companies should have their
individual management teams, thus eliminating the scope for any
disagreement between the two businesses.
Carl Icahn owns 0.82% of eBay. The giant online marketplace
turned down his proposal as it believes that there will be no
additional benefit to either eBay or PayPal if Icahn's demand is
met. On the other hand, the two can, in combination generate the
maximum value for shareholders.
The digital payment arm, PayPal, was acquired by eBay in 2002
for $1.5 billion. Since then, it has become the giant
marketplace's engine for growth and the actual reason for
investors to hold shares of eBay. As more and more customers
prefer online shopping nowadays, the use of this online payment
service has increased. Thus, PayPal accounts for a large
percentage of eBay's total revenue.
Additionally, it 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
Recently, Alibaba Group, a Chinese Internet company in which
) holds a stake, announced its IPO.
Currently, eBay holds a Zacks Rank #3 (Hold).
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