by Tom Taulli | March 5, 2014 2:22 pm
Legendary investor Carl Icahn likes a good fight, and he’s got practice — he’s been huffing and puffing since the early 1980s.
No one does it better.
Carl Icahn’s latest battle is with eBay (EBAY), and he is agitating for the spinoff of the PayPal payments business to unlock value in EBAY stock. The fight has garnered lots of headlines, and everyone from other activist investors to the financial media have sounded off.
But what do EBAY shareholders think?
Analysts at AllianceBernstein put together a survey of EBAY stock investors to find out, and got 178 responses — 64% from long-only investors and 34% from hedge funds. (While the report admitted that the findings were “imperfect,” the sample size is at least reasonable enough to glean something from.)
The takeaway was actually pretty mixed, especially when it came to the board. For instance, among all respondents, less than 30% of respondents felt that Carl Icahn should get a board seat, but 55% think the board needs some sort of shuffling. That’s understandable, especially in light of missteps such as missing out on the huge upside from the sale of Skype to Microsoft (MSFT).
And concerning a PayPal spinoff:
“… 51% believe that a split is not wise, while 43% believed a split would be the right way to go.”
No shocker on the divided opinion. After all, there definitely are synergies between eBay and PayPal. The two essentially feed on each other — eBay provides a low-cost funnel for new userse while PayPal generates a nice recurring revenue stream.
On the flip side, a spinoff wouldn’t necessarily mean that these benefits would have to be scrapped. For instance, the pair could enter multiyear agreements to keep up such synergies.
A spinoff would have some key benefits, too.
First of all, it would provide investors with a pair of pure-play opportunities — one directly on an e-commerce platform, and the other on mobile payments. It’s widely thought that PayPal will be the bigger growth prospect considering how explosive the mobile payments business is expected to be in future years.
A spinoff also would make it easier for each company to focus on their core businesses and provide equity incentives that are better tied to performance.
Sure, not all spinoffs are successful, but they certainly can be done, even in the online space. Just look at Expedia’s (EXPE) TripAdvisor (TRIP), whose transaction was completed in late 2011. Since then, TRIP stock has posted a sizzling gain of 280%.
And as for Carl Icahn?
Icahn is far from perfect, and has made some real clunker investments during his time. But on the whole, he gets things right more often than he gets them wrong. Think Netflix (NFLX) and Herbalife (HLF), among others. His savvy has guided him to a personal fortune of $20 billion, and his Icahn Enterprises, LP (IEP) is up roughly 80% in the past year to smash the broader markets.
While Carl Icahn is loud and obnoxious — his latest salvo was saying that politicians operate better than eBay’s boardroom — he has at least earned a hearing on his views regarding PayPal.
With the division’s growth profile and market potential, PayPal could make TripAdvisor look like a tortoise.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
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