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Activist Investor Carl Icahn Pushes eBay to Split with PayPal

Oct 01, 2014 02:52 AM EDT | By Eunice Tagalog
PayPal, eBay, spinoff
PayPal Logo
(Photo : Wikimedia Commons)

Activist Investor and eBay's major shareholder Carl Icahn suggested that the company spin off its PayPal division.

The e-commerce giant bought PayPal for $1.5 billion back in 2002 and the two have been inseparable ever since, with the PayPal payment system deeply incorporated in one of the biggest online marketplaces.

The move is said to be eBay's effort to separate the two companies as Icahn previously suggested this Jan.

"Paypal's a jewel and eBay is covering up its value. If you just went out and took it public you'd get a huge premium because of growth," Icahn argued.

Initially, eBay CEO John Donahoe did not agree with Icahn's plan stating that the two have PayPal has been deeply ingrained in their system and benefited the company that it's hard to let go.

"First, eBay accelerates PayPal's success. Second, eBay data makes PayPal smarter. And third, eBay funds PayPal's growth," Donahoe contended.

PayPal has brought in $6.6 billion last year, 41 percent of eBay's total revenue and contributed to 36 percent of its profits.

Donahoe and the members of the board now changed their mind as eBay will reportedly spin off its PayPal division coming 2015.

He states that he understood Icahn's proposal and realized that "eBay and PayPal will be sharper and stronger, and more focused and competitive as leading, standalone companies in their respective markets."

"As independent companies, eBay and PayPal will enjoy added flexibility to pursue new marker and partnership opportunities," the eBay CEO added.

The spinoff will result in Donahoe stepping down as CEO of eBay in 2015. Donahoe will be reportedly replaced by current President of eBay Marketplaces, Devin Wening.

PayPal, on the other hand, will have American Express Enterprise Growth Group President Dan Schulman as CEO.

Meanwhile, the mobile payment wars begins as Apple is releasing Apple Pay into the iPhone 6 and iPhone 6 Plus.

PayPal tried to push back Apple's new service by reportedly posting a full-page ad in The New York Times connecting Apple Pay to a leak of nude celebrity photos over the Internet. 

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