Regions

Icahn suggests 20pct IPO for PayPal

March 20
8:53 AM 2014

Activist investor Carl Icahn is not yet about to give up on a PayPay spinoff. Today, Icahn proposed that eBay hold an initial public offering of 20% of PayPal, VentureBeat reported.

Under his new proposal for the electronics payments service, eBay would still own 80% of PayPal. Icahn said, "We believe eBay could easily conduct an Initial Public Offering of PayPal, selling 20% to the public. eBay would retain 80% of PayPal with control. Before the transaction is consummated the companies could enter into a long-term, commercially viable contract, preserving all synergies. This type of relationship is customary in partial IPOs and would be particularly important for eBay as currently, outside of PayPal, there does not exist a global payment processing solution competent enough to service eBay's users. Luckily for PayPal, competitors such as Google, Apple and many others do not yet have the same comparable scale and product offerings."

Icahn said that the proposal would allow PayPal to stay competitive over the long run. Meanwhile, the 80% ownership that eBay will hold will enable it to retain the benefits of keeping PayPal independent. Icahn said, "A 20 percent IPO of PayPal could allow for all of the benefits of an independent PayPal, preserves all of the benefits of keeping PayPal in-house and could be structured so as to be tax-free to shareholders."

Icahn's initiative to separate PayPal from eBay is done on the hope that the move would provide higher valuation for shareholders. His newest move also indicates that a publicly-traded PayPal would be advantageous when it comes to making purchases and getting highly-talented people on board, the report said.

However, eBay has already responded and like before, has insisted that eBay and PayPal work together as one. Part of its response to Icahn's suggestion read, "A partial separation of PayPal is not a new idea, and we're glad to see that Mr. Icahn now seems to agree that a full separation of PayPal is not a good idea... In the future, our board will continue to evaluate all strategic options and make the right decisions for shareholders. But today, PayPal and eBay are better together."

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