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Carl Icahn Gets Personal Against eBay

Richard Saintvilus
Billionaire activist-investor Carl Icahn gives an interview on FOX Business Network's Neil Cavuto show in New York February 11, 2014. REUTERS/Brendan McDermid

NEW YORK ( TheStreet) -- Activist investor Carl Icahn has made a name for himself by making boardrooms uncomfortable. After taking up recent fights against Dell and Apple , the corporate raider has now turned his sights towards eBay . And it's gotten personal.

Aside from demanding that eBay spin-off its popular payment system PayPal, Icahn recently claimed that board members Scott Cook and Marc Andreessen have not acted in the best interest of shareholders, to put it mildly. He has described their actions as "lapses in corporate governance."

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In a letter to shareholders, Icahn said: "We have found ourselves in many troubling situations over the years, but the complete disregard for accountability at eBay is the most blatant we have ever seen."

Icahn was referencing Scott Cook for his investments in companies that compete with PayPal and eBay. When it came to Andreessen, Icahn claims that shareholders lost out on roughly $4 billion in profit when he sold Skype to Microsoft three years ago in that $8.5 billion deal. It seems so long ago.

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If you recall, Skype was originally under the eBay umbrella. Silver Lake, Andreessen's venture capital firm, bought Skype from eBay before they sold it to Microsoft. At the time of the announced deal with Microsoft, eBay celebrated the fact that it made (then) a 50% return on its initial investment of $2.6 billion in 2005. In that regard, it's hard to see what Icahn's gripe is about.

Icahn now believes that eBay should have played hardball. He insists that the company could have had a better offer for shareholders. I don't recall anyone crying foul at the time. And eBay maintained that the board had explored all possible sale offers and ultimately decided on the best deal for shareholders.

Today, with Facebook paying $19 billion for WhatsApp, and BlackBerry claiming it would sell its messenger service at that price, it seems like eBay got a bad deal. But at the time, no one knew what the market for web-calling services was. Icahn is not letting up.

Last Friday, he said that eBay was run like a "totalitarian state." And he suggested that Cook, who is chairman of Intuit , should not serve on eBay's board because Intuit has built a GoPayment system that rivals PayPal. And that system has begun to gain considerable traction.

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Icahn's words were as follows:

"I am frankly growing a bit tired of reading eBay's repetitive evasive responses to the legitimate issues we have been raising. Their messages all sound the same. Repeating the same mantra - 'world-class' board, 'world-class' board, 'world-class' board -- over and over again might work in a totalitarian state where only one side gets to speak. But, thankfully, we live in a democratic state where there can be a voice of reason on the other side."

And to think that all of this began because eBay's board refused to separate PayPal from the rest of the company. After Icahn took a 2% stake in the company for roughly $1.5 billion, he maintained readiness for yet another proxy fight against eBay in hopes of landing two board seats for his representatives.

In response, CEO John Donahoe, whose leadership Icahn described as "completely asleep," responded on the company's corporate blog saying, "We continue to believe that the company, our customers, and our shareholder are best served by keeping PayPal and eBay together." The result of all of this has been nothing but mudslinging back and forth.

It remains to be seen who eventually wins this fight. But with eBay shares are near 52-week highs, this has done nothing but help its investors. Icahn, who owns 2% of eBay's stock, wins regardless. This is the part that many people seem to overlook. He's having the effect he wanted to have, even when it appears that he's fallen short on his ultimate goals.

At the time of publication, the author held no position in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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