eBay Rejects Icahn Move To Spin Off PayPal

By Jeffrey Green (@epaymentsguy)

EBay’s board of directors on Jan. 22 rejected a proposal by investor Carl Icahn, who had submitted a non-binding proposal for a spin-off of its PayPal business into a separate company. Icahn earlier this month acquired shares and derivative securities that give him an economic interest of approximately 0.82% in eBay, the company reported.

Icahn also nominated two of his employees to eBay’s board of directors, and the board’s Corporate Governance and Nominating Committee will consider them “in the ordinary course of business,” eBay said.

In the company’s earnings release, eBay noted that its board routinely assesses the company’s strategic direction and has explored in depth a spin-off or separation of PayPal. It continues to believe that it wouldn’t be appropriate.

“eBays [board] has concluded that the company and its shareholders are best served by the current strategic direction of the company and does not believe that breaking up the company is the best way to maximize shareholder value,” the company stated. “As part of eBay Inc., PayPal is able to leverage the company’s technology capabilities, commerce platforms and relationships with retailers, brands and large merchants worldwide. Payment is part of commerce, and as part of eBay, PayPal drives commerce innovation in payments at global scale, creating value for consumers, merchants and shareholders.”

The company’s fourth-quarter and year-end earnings reflected this point.

PayPal reported a strong fourth quarter performance with accelerating momentum in its merchant services business. Revenue increased 19% in both the quarter and the full year, resulting in $6.6 billion in 2013. PayPal gained 5.2 million active registered accounts in the quarter and ended the year with 143 million, a 16% increase, eBay said in its earnings release.

PayPal’s net total payment volume (TPV) grew 25% in the quarter with 3 billion transactions generating $180 billion in net TPV for the full year. On-eBay payment volume grew 14% in both the quarter and for the full year, producing $54 billion in net TPV for the year, eBay said.

Merchant Services net TPV increased 31% in the quarter and 29% for the full year, resulting in $125 billion in net TPV for the year. Mobile was a key catalyst, with payments volume off eBay growing 128% for the year. Total mobile-payment volume for the year was $27 billion, eBay said.

In the earnings release, eBay CEO and President John Donahoe noted that mobile exceeded expectations for the year. “Our total mobile commerce volume grew 88 percent, with eBay reaching $22 billion and PayPal hitting $27 billion in 2013,” he said. “And mobile added more than 14 million customers. PayPal and eBay together create an incredibly strong global commerce ecosystem for consumers and merchants, and we continue to see tremendous growth opportunities ahead.”