Icahn wants eBay to set PayPal free

Finacier Carl Icahn

A high-profile activist investor’s latest use of the megaphone is to call for an iconic tech firm to split up. Carl Icahn wants eBay to spin off PayPal, separating the online auction site from the digital payment service. eBay’s CEO wants to hang onto PayPal. He says keeping it provides that enduring corporate buzzword: synergy.

“It’s a seamless integration for the users of eBay,” says University of North Carolina business strategy professor Arvind Malhotra. “That’s always been a big advantage, to have such a dominant payment system be part of your company.”

Malhotra can also lay out the opposite argument about PayPal. Separating it from eBay would potentially make it a more attractive option for eBay’s competitors. That might enable a fast-growing service to grow even faster.

Carl Icahn believes setting PayPal free will boost the stock, pointing out that eBay has higher growth rates than other eBay lines of business.

He’s also calling for change at Apple. And many other tech firms have found themselves in the crosshairs of activists. Market watchers expect continued interest from activists in technology companies.

“They’re not young anymore,” says Northeastern University finance professor Don Margotta. “Now people are looking at them no longer as constant growth engines, but as maturing companies.”

Even an aging company can still make enough money to be fresh meat for activist investors.

Mark Garrison: eBay’s CEO wants to hang onto PayPal. He says keeping it provides that enduring corporate buzzword: synergy.

Arvind Malhotra: It’s a seamless integration for the users of eBay. So that’s always been a big advantage, to have such a dominant payment system be part of your company.

That’s University of North Carolina business professor Arvind Malhotra, who can also lay out the opposite argument about PayPal.

Malhotra: Since it’s part of eBay, it’s not seen as a neutral platform. But if it existed as a separate entity, its adoption rate could be even higher.

Carl Icahn believes setting PayPal free will boost the stock. He’s also calling for change at Apple. Northeastern University finance professor Don Margotta expects to see more folks like Icahn targeting tech firms.

Don Margotta: They’re not young anymore and now people are looking at them no longer as constant growth engines, but as maturing companies.

Aging, yes, but they’re still making enough money to be fresh meat for activist investors. In New York, I’m Mark Garrison, for Marketplace.

About the author

Mark Garrison is a reporter for Marketplace and substitute host for the Marketplace Morning Report, based in New York.

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