Stock Spinoffs

After Successful Spinoff Push, Carl Icahn Exits Ebay, Retains 3.8% Stake In PayPal

One of the highlights of the ‘Summer of Spin’ was eBay’s (EBAY) spin off of payments processor PayPal (PYPL). Several activists had been pushing hard for the spin, including Carl Icahn, who at one point, engaged in a heated war of words with the company and then CEO John Donahoe. Although he ultimately struck a deal with a company in exchange for a board seat, it was clear his interest at the time was in the value of the payments business, a fact which still seems to be the case today. According to his most recent 13F filing (showing positions as of 9/30) with the SEC, Mr. Icahn dumped all of his EBAY holdings while maintaining his entire stake in PayPal which currently represents ~3.8% of the company’s shares. Quite a statement. Other big names such as Seth Klarman’s Baupost Group and Soros Fund Management also added to their PayPal stakes (at least compared to their prior quarter eBay holdings).

The company’s shares are down a bit since gaining independence and the competition in the payments space is heating up with Apple (AAPL) and the big banks making a bigger push. Barron’s and others see a lot of upside in the company though. Perhaps the expectations were a bit high out of the gate? Meanwhile, eBay is up a bit after reporting a nice quarter in late October which included over $500m of shares repurchased. Some are even arguing its undervalued with much more upside than downside. This is a nice, full recap of the recent moves the company has made. Ultimately, a few months of share price performance are meaningless when considering the long term trajectories of these businesses. Wedbush analyst Gil Luria gave his take on the situation:

eBay and PayPal appeal to completely different investors — that is the benefit of the spin-off…Growth investors will follow Mr. Icahn’s lead and invest in PayPal, and investors looking for return of cash and a low valuation will continue to own eBay.

A bit simple, but mostly fair. After succeeding at eBay, I bet Mr. Icahn’s attention right now is mostly focused on his newest mega breakup target: American International Group (AIG).

Disclosure: Author holds shares of AAPL

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