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Carl Icahn On eBay: "So Much For Honest, Accurate Debate"

          Carl Icahn On eBay: "So Much For Honest, Accurate Debate"

PR Newswire

NEW YORK, March 3, 2014

NEW YORK, March 3, 2014 /PRNewswire/ --Today Carl C. Icahn released the
following open letter to stockholders of eBay Inc.

Despite having just days ago professed a desire for "honest, accurate debate"
on the issues, eBay declined CNBC's offer to participate in a televised
discussion with me. Then last Thursday eBay director Marc Andreessen attempted
to defend his business practices to the Wall Street Journal but refused to
directly address our assertions regarding his conflicts of interest. I think I
am beginning to see a pattern here.

I have a message for eBay's board: You may be able to duck and weave when it
comes to the media, but in a few short weeks you will have no choice but to
face your stockholders at the annual meeting. We all deserve to know the truth
about what really happened with Skype.

THESE ARE THE FACTS AND WE BELIEVE THEY ARE INDISPUTABLE –

  oeBay completed its acquisition of Skype in October 2005 for approximately
    $2.5 billion, plus potential performance-based consideration;[1]
  oeBay announced in April 2009 that it was planning to separate Skype from
    the company, beginning with an IPO that was intended to be completed in
    the first half of 2010;[2]
  oThat IPO never happened;[3]
  oeBay instead announced in September 2009 that it had agreed to sell a
    controlling interest in Skype for only $1.9 billion in cash and a $125
    million note (less than eBay paid to acquire Skype) to an investor group
    that included eBay director Marc Andreessen's venture capital firm;[4]
  oCommenting at the time on this sale announcement, prominent technology
    writer Om Malik stated: "If you're an eBay shareholder, it's time for you
    to get mad about the sheer incompetency of the management. First they paid
    top dollar for Skype back in 2005, making billionaires out of Niklas
    Zennstrom and Janus Friis. And, now instead of waiting for an opportune
    time to go public, eBay management is selling low, at a time when the only
    buyers are bargain hunters."[5]
  oMicrosoft announced in May 2011 that it had reached an agreement with eBay
    director Marc Andreessen's investor group to acquire Skype for $8.5
    billion in cash (a deal that would result in Mr. Andreessen's venture
    capital firm tripling its money after only 18 months);[6]
  oOn the same day that the Microsoft deal was announced, eBay director Marc
    Andreessen boasted about this windfall (which we believe should have
    instead accrued to the benefit of eBay stockholders), stating: "This is
    one of the best-performing buyout deals of all time. To get this kind of
    return on a buyout deal in such short time is really rare." [7]
  oIn the same interview, Mr. Andreessen made the following admission (which
    we believe strongly suggests that he knew at the time that his investor
    group bought a controlling interest in Skype from eBay, at what turned out
    to be a bargain price, that Microsoft was also interested in buying
    Skype): "One reason we were enthusiastic about buying Skype was that even
    though we thought it would be a tremendous standalone business, we also
    knew that for Microsoft and a number of other companies Skype would be an
    obvious thing to buy. We knew we'd always have the fall-back of selling to
    strategic buyers." [8]
  oeBay stated in February 2014, in response to our criticisms, that "the
    company explored all options for divesting Skype, including an IPO and
    sale to a strategic buyer" and that the sale of a controlling stake in
    Skype to director Marc Andreessen's investor group was "the option that
    offered the highest return at the time";[9]
  oeBay director Marc Andreessen conducted an interview with the Wall Street
    Journal in February 2014 in an attempt to defend his business practices.
    He refused to specifically address our assertion that, if he knew
    Microsoft was waiting in the wings to buy Skype (which we believe his
    boastful quote above strongly suggests), he had a duty under Delaware law
    to so inform eBay's board instead of usurping that corporate opportunity
    for his investor group: "Mr. Icahn also asserted that it was Mr.
    Andreessen's fiduciary duty to eBay CEO Donahoe to disclose the potential
    interest in a multibillion dollar Skype purchase by a strategic player.
    While Mr. Andreessen declined to respond to that accusation, he pointed
    out that investors who have a stake on two sides of a deal also have
    confidentiality agreements to two parties." [10]

THESE ARE THE QUESTIONS WHICH WE BELIEVE ARE RAISED BY THE ABOVE FACTS –

  oWhat did eBay's directors know about Microsoft's interest in Skype and
    when did they know it?
  oDid eBay director Marc Andreessen know at the time that his investor group
    was purchasing a controlling interest in Skype from eBay that Microsoft
    was interested in buying Skype (as we believe is strongly suggested by his
    quote above)?
  oIf so, did he share that information with eBay's board of directors?
  oIn light of the massively higher price that Microsoft was willing to pay
    for Skype as compared to the price at which eBay sold a controlling
    interest to director Marc Andreessen's investor group, is it really
    possible that "all options" were sufficiently explored?
  oDid eBay director Marc Andreessen enter into a confidentiality agreement
    that prevented him from sharing with eBay's board of directors information
    about Microsoft's interest in purchasing Skype (as we believe is strongly
    suggested by his above quote)?
  oIs eBay director Marc Andreessen so clueless about corporate governance
    and the duties that directors owe to corporations under Delaware law that
    he truly believes that entering into a confidentiality agreement with a
    third party which apparently limited his ability to share vital
    information with eBay's board of directors is acceptable or an excuse for
    his actions?
  oDoes eBay director Marc Andreessen understand that if he entered into a
    confidentiality agreement with a third party that prevented him from fully
    discharging the duties he owed to eBay – that the mere act of entering
    into such an agreement may have been a breach of duty in and of itself
    (wholly apart from the usurpation of corporate opportunity that appears to
    have taken place here)?
  oWho is to blame for this epic blunder?
  oIs it possible to recover for eBay stockholders all or a portion of
    Skype's upside that was transferred to director Marc Andreessen's investor
    group at the expense of eBay stockholders?

We believe eBay and director Marc Andreessen have thus far refused to
adequately clarify the public record. Therefore, we are in the process of
demanding an inspection of eBay's relevant books and records pursuant to our
right as stockholders under Delaware law. We will attempt through our
examination of these books and records to answer the above questions for ALL
stockholders of eBay.

In my opinion, Mr. Andreessen's conflicts are clear and insurmountable.
However, Mr. Andreessen attempted to defend himself, telling the Wall Street
Journal that "he recuses himself from boardroom discussions that could involve
companies his firm is backing."[11] Seriously? Mr. Andreessen expects eBay
stockholders to be comforted by the fact that he self-polices himself? Excuse
me if I do not find that nearly sufficient – especially in light of the Skype
fiasco. As Jon Shazar at Dealbreaker eloquently noted when commenting on the
Wall Street Journal interview:

  Carl Icahn thinks that eBay should spin off PayPal, and to prove it, he said
  a couple of eBay's more prominent directors have more conflicts of interest
  than he has years. What he didn't know is that one of them, Netscape founder
  and Silicon Valley legend Marc Andreessen, has a fool-proof system for
  avoiding such delicate situations: Whenever one of the seven boards of
  directors on which he serves starts talking about an area in which he has an
  interest—presumably all of them—he just closes his eyes and puts his
  headphones on and, presto, no conflict of interest.[12]

While that bit of hyperbole is no doubt funny, this is no laughing matter –
especially when not only billions of dollars of stockholders' money, but also
the future long-term path of our company, hang in the balance.

In closing, I will leave you with another quote from the Wall Street Journal
interview:

  Charles Elson, director of the John L. Weinberg Center for Corporate
  Governance at the University of Delaware, said a director withdrawing from
  conversations may not be adequate to eliminate conflicts in some instances.
  "Recusal sounds great legally," Mr. Elson said. "It's pretty tough
  practically." [13]

We strongly believe that eBay management and the board should know better than
to allow this to continue for one moment longer. Stockholders, please stay
tuned. We are looking forward to sharing with you our business rationale for
separating PayPal from eBay. Thank you for your continued support.

Sincerely,

Carl C. Icahn

Follow me on twitter: @Carl_C_Icahn

#notworldclass   #spinpaypalnow



THIS LETTER INCLUDES INFORMATION BASED ON DATA FOUND IN FILINGS WITH THE
SECURITIES AND EXCHANGE COMMISSION, INDEPENDENT INDUSTRY PUBLICATIONS AND
OTHER SOURCES. ALTHOUGH WE BELIEVE THAT THE DATA IS RELIABLE, WE HAVE NOT
SOUGHT, NOR HAVE WE RECEIVED, PERMISSION FROM ANY THIRD-PARTY TO INCLUDE THEIR
INFORMATION IN THIS PRESENTATION. MANY OF THE STATEMENTS IN THIS PRESENTATION
REFLECT OUR SUBJECTIVE BELIEF.

SECURITY HOLDERS ARE ADVISED TO READ THE PROXY STATEMENT AND OTHER DOCUMENTS
RELATED TO THE SOLICITATION OF PROXIES BY Carl C. Icahn AND HIS AFFILIATES
FROM THE STOCKHOLDERS OF EBAY INC. WHEN THEY BECOME AVAILABLE BECAUSE THEY
WILL CONTAIN IMPORTANT INFORMATION, INCLUDING INFORMATION RELATING TO THE
PARTICIPANTS IN SUCH PROXY SOLICITATION. WHEN COMPLETED, A DEFINITIVE PROXY
STATEMENT AND A FORM OF PROXY WILL BE MAILED TO STOCKHOLDERS OF EBAY INC. AND
WILL ALSO BE AVAILABLE AT NO CHARGE AT THE SECURITIES AND EXCHANGE
COMMISSION'S WEBSITE AT HTTP://WWW.SEC.GOV. INFORMATION RELATING TO THE
PARTICIPANTS IN SUCH PROXY SOLICITATION IS CONTAINED IN THE SCHEDULE 14A FILED
BY CARL C. ICAHN WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 24,
2014 (THE "SCHEDULE 14A"). EXCEPT AS OTHERWISE DISCLOSED IN THE SCHEDULE 14A,
THE PARTICIPANTS HAVE NO INTEREST IN EBAY INC. OTHER THAN THROUGH THE
BENEFICIAL OWNERSHIP OF SHARES OF COMMON STOCK OF EBAY INC. AS DISCLOSED IN
THE SCHEDULE 14A.

[1] http://investor.ebay.com/releasedetail.cfm?releaseid=176402

[2]
http://blog.ebay.com/breaking-ebay-inc-announces-plan-for-2010-ipo-of-skype/

[3] http://www.sec.gov/Archives/edgar/data/1498209/000119312511146593/drw.htm

[4]
http://blog.ebay.com/ebay-to-sell-skype-deal-puts-skype-value-at-2-75-billion/

[5] Om Malik, Skype Sale Nears: Why eBay Shareholders Should Be Mad,
Gigaom.com, September 1, 2009. Available at:
http://gigaom.com/2009/09/01/ebay-skype-sale/

[6] https://www.microsoft.com/en-us/news/press/2011/may11/05-10corpnewspr.aspx

[7] Dan Lyons, Microsoft Buys Skype: Marc Andreessen on the Sale, The Daily
Beast, May 10, 2011. Available at:
http://www.thedailybeast.com/articles/2011/05/10/microsoft-buys-skype-marc-andreessen-on-the-sale.html


[8] Dan Lyons, Microsoft Buys Skype: Marc Andreessen on the Sale, The Daily
Beast, May 10, 2011. Available at:
http://www.thedailybeast.com/articles/2011/05/10/microsoft-buys-skype-marc-andreessen-on-the-sale.html


[9]
http://blog.ebay.com/ebay-inc-responds-to-carl-icahns-feb-24-open-letter-to-stockholders/
[emphasis added]

[10] See Douglas MacMillan and Evelyn M. Rusli, Andreessen Offers Defense in
Wake of Icahn's eBay Criticism, The Wall Street Journal, February 27, 2014
[emphasis added].

[11] See Douglas MacMillan and Evelyn M. Rusli, Andreessen Offers Defense in
Wake of Icahn's eBay Criticism, The Wall Street Journal, February 27, 2014.

[12] See Jon Shazar, Carl Icahn Knows Less About Corporate Governance Than He
Does About Technology, Carl Icahn Target Says, Dealbreaker.com, February 27,
2014.

[13] See Douglas MacMillan and Evelyn M. Rusli, Andreessen Offers Defense in
Wake of Icahn's eBay Criticism, The Wall Street Journal, February 27, 2014.



SOURCE Carl C. Icahn

Contact: Susan Gordon: (212) 702-4309
 
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