Icahn ratchets up eBay rhetoric by slamming Andreessen, Cook for conflicts of interest
Carl Icahn didn't pull any punches in an open letter to eBay shareholders, essentially accusing a pair of board members of lining their pockets at the company's expense and skewering CEO John Donahoe for letting it all happen in the first place.
Activist investor Carl Icahn didn't mince words in an open letter to eBay shareholders Monday, the company's board of directors of "certain material conflicts of interest, which we believe could put the future of our company in peril."
Icahn, who currently holds 0.82 percent of the company's outstanding shares, has been calling for the company to spin off its highly popular and profitable PayPal unit and to shake up the company's board with a couple of his handpicked replacements, a pair of requests that CEO John Donahoe has thus far denied out of hand.
In his letter, Icahn took Donahoe to task for failing to be aware of what was happening within his company, the alleged shortcomings of his fellow board members and questioned his ability to make the strategic decisions necessary to grow the company and deliver maximum shareholder value.
"It is very sad to us that Mr. Donahoe appears to lack awareness about what is going on around him on his board and in the marketplace," Icahn wrote in the letter. "It makes us seriously question his judgment and ability to make the crucial decisions that must be made concerning the future of PayPal."
Icahn then turned his wrath toward Marc Andreessen, the Netscape cofounder turned venture capitalist and Intuit founder Scott Cook, two of the company's board members who he claims are intentionally undermining eBay's short- and long-term success for their own personal gain.
"Mr. Cook is the founder, former CEO and a current board member of Intuit Inc.," Icahn wrote, arguing that Intuit and PayPal are direct competitors in the payment processing space. "How can a 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?"
Icahn also has big issues with Andreessen's investments in Skype and Kynetic, a pair of one-time eBay subsidiaries.
"In September 2009, an investor group that included Mr. Andreessen, preempted a planned Skype IPO (in which stockholders would have ended up making multiple billions of dollars) and bought 70 percent of Skype for less than what eBay had paid to acquire it," Icahn wrote. "Mr. Andreessen basked in the purchase, saying that 'Skype is the archetypal phenomenon: a breakthrough technology.'"
"One cannot help but wonder what happened to Mr. Andreessen's fiduciary responsibility to share his feelings with Mr. Donahoe and the board rather than preempt the planned IPO to further his own interests," Icahn added. "A mere 18 months later, Mr. Andreessen's investor group flipped Skype to Microsoft for $8.5 billion, a value three times what they paid for it, netting approximately $4 billion at the expense of eBay stockholders."
The company added that Andreessen was recused from all decision making in the Skype transaction and noted that he fully supported his recusal.
"Separating Skype enabled eBay to invest in its core growth engines of e-commerce and online payments, while allowing for potential upside if Skype's potential was fully realized," it added.
As for Cook, eBay extolled his "exceptional track record of creating value and driving innovation," and claimed that the overlap between Intuit and eBay is "small, fully disclosed and within the SEC safe harbor for interlocking directorates."
It would seem that eBay was hardly moved by Icahn's latest efforts to replace the board members and push for the PayPal spinoff.
"We prefer to engage in more constructive and substantive discussions of why, in our view, PayPal and eBay are better together," the company said in its statement. "Instead, Mr. Icahn unfortunately has resorted to mudslinging attacks against two impeccably qualified directors."