Will eBay Shareholders Side With Icahn?

Source: Thinkstock

EBay (NASDAQ:EBAY) Chief Executive John Donahoe said in an interview with Reuters that eBay’s top shareholders do not agree with Carl Icahn’s belief that PayPal should be spun off from the company to achieve its full value. Icahn has been slamming eBay in the press since taking a stake in the company in January, issuing several shareholder letters calling for board members Marc Andreessen and Scott Cook to step down and for PayPal to be spun off. Icahn is well known for using his use of strong-arm techniques to influence the companies he has investments in.

Donahoe told Reuters that he spoke to between sixteen and twenty of eBay’s biggest shareholders and claimed that the majority of them agreed that the company should continue to resist Icahn’s proposals. “I met with fifteen, sixteen of our top twenty active investors, have engaged back and forth in dialogue with them. The majority of them understand that they’re stronger together,” he said.

According to data compiled by Reuters, eBay’s top twenty shareholders own 42 percent of eBay shares. The company’s founder, Pierre Omidyar, alone owns 8.4 percent of those shares and is eBay’s largest shareholder. Omidyar has criticized Icahn and said he supports both eBay’s board and the plan to retain ownership of PayPal.

“A new eBay shareholder, Carl Icahn, is making unsubstantiated claims about our company — and deliberately impugning the integrity of our directors,” Omidyar said. “Instead of having an honest discussion about a reasonable question, Mr. Icahn has chosen to attack the integrity of two highly respected and qualified board members, Scott Cook and Marc Andreessen. He also has attacked the integrity of our CEO John Donahoe.”

Donahoe went on to say that activist investors are important but that he doesn’t like Icahn’s technique of getting heavily involved in the media. “If you were to look at a spectrum of activists, you see a different playbook, you see different approaches,” Donahoe told Reuters.

Icahn believes that PayPal needs to be spun off in order to achieve its full value. “We believe creating two dedicated and highly focused independent businesses would provide employees and stockholders the best opportunity to remain competitive over the long term,” Icahn said in his first letter to eBay’s shareholders. He believes the businesses are too different for PayPal to reach its full potential as a part of eBay. Separating PayPal from eBay would encourage eBay competitors like Amazon (NASDAQ:AMZN) and Wal-Mart (NYSE:WMT) to adopt PayPal’s service and foster PayPal’s growth, according to the investor.

Icahn released yet another letter to eBay shareholders on Thursday, saying “we have not yet begun to fight” on the PayPal issue. While Donahoe told Reuters that eBay’s biggest shareholders believe PayPal should remain a part of the company, in the letter, Icahn cites a survey performed by Bernstein Research that showed 55 percent of eBay shareholders think there should be changes made to eBay’s board; 43 percent think spinning off PayPal is the right decision.

Both Icahn and Donahoe are waiting on an upcoming shareholder meeting to find out how the company’s investors really feel about PayPal and eBay’s board composition.

More from Wall St. Cheat Sheet:

Follow Jacqueline on Twitter @Jacqui_WSCS