Carl Icahn On eBay: Conflicts Of Interest! Options Backdating Scandal! Investments In Direct Competitors! Department Of Justice

    Carl Icahn On eBay: Conflicts Of Interest! Options Backdating Scandal!
Investments In Direct Competitors! Department Of Justice Investigation! These
                         Are "World-Class" Directors?

PR Newswire

NEW YORK, March 12, 2014

NEW YORK, March 12, 2014 /PRNewswire/ --Today Carl C. Icahn released the
following open letter to stockholders of eBay Inc.:

I believe that the Skype affair, only some of the sordid details of which we
recently exposed, represents a complete and utter breakdown in the system of
checks and balances that a properly functioning board should provide. Without
a strong and independent board that rejects cronyism and is willing to hold
management accountable, I believe that eBay stockholders may again suffer a
travesty even worse than what was visited upon them when Skype was sold
prematurely and $4 billion of upside was lost. I believe strongly that
stockholders should vote for our nominees because eBay cries out, like no
other company I have ever seen before in my many years on Wall Street, for
owner representatives on the board who will act as watchdogs. In my opinion,
if this board and management have nothing to hide, then they should have
absolutely no objection to having new blood in the boardroom.

By the same token, I believe that if nothing untoward went on with the sale of
Skype, and if eBay, CEO John Donahoe, director Marc Andreessen and Chairman
and founder Pierre Omidyar truly believe, as they have proclaimed (though not,
I believe significantly, under oath), that my claims are "false and
misleading," then the board should have absolutely no reason not to respond to
the books and records demand we have submitted pursuant to our right as
stockholders under Delaware law in a manner that will permit ALL stockholders
to see every page of the documentary evidence. Thus far, the company has
offered to show us only certain limited amounts of material responding to our
inquiries – and has insisted that all documents produced must be subject to
confidentiality restrictions. Why, if there is nothing to hide, would records
relating to a 5-year old transaction not be permitted to be shared with ALL
stockholders?

We are not confident, based on John Donahoe's recent interview with the
Financial Times[1] - in which he lamented the fact that he had stockholders to
answer to – that the truth will be forthcoming without the threat of legal
process – which is why we continue to press our books and records demand
pursuant to Delaware law. The Financial Times article states: "Mr. Donahoe
says that his business should be allowed to innovate without shareholder
distractions." And the article quotes Mr. Donahoe as saying: "Every new
Silicon Valley company has a dual class of stock to prevent this issue,
because innovation has a long-term time horizon." In any rational world, dual
class stock, which is an outrageous scam, would be illegal for public
companies. But more importantly, John Donahoe misses the point entirely
because the "shareholder distraction" here involves the premature sale of
Skype – not innovation with a long-term time horizon. Even more importantly,
to me, this attitude of apparent disdain for the rights of the owners of the
company (which may be summed up as – "Being a CEO of a public company would be
a great job, were it not for those pesky shareholders") goes a long way toward
explaining why the full story of what really happened with Skype seems to us
to continue to remain shrouded in the type of fog and mystery often engineered
by highly paid public relations consultants and lawyers, the kind of folks who
invent undemocratic entrenchment devices like dual class stock so that
companies can take stockholder money and then tell them to "sit down and shut
up." It seems to me that we do not know the full story of Skype yet because
this board does not believe it should have to explain its failures to the
stockholders, who instead should remain silent and be grateful for whatever
crumbs we get.

MESSAGE TO EBAY'S BOARD: THESE TYPES OF SHENANIGANS MAY FLY IN COUNTRIES WHERE
DECISIONS AFFECTING MILLIONS OF PEOPLE'S LIVES ARE MADE IN SECRET POLITBURO
MEETINGS. BUT I BELIEVE ONE OF THE THINGS WHICH MAKES OUR COUNTRY THE GREATEST
ON EARTH IS OUR DEMOCRATIC FORM OF GOVERNMENT, WHERE DELIBERATIONS ARE
CONDUCTED IN THE LIGHT OF DAY AND OUR LEADERS ARE ACCOUNTABLE TO THE PEOPLE.
LEGISLATION SUCH AS THE FREEDOM OF INFORMATION ACT ENSURES THAT NOTHING STAYS
BURIED FOR LONG. THE WORDS OF JUSTICE LOUIS BRANDEIS ARE JUST AS RELEVANT
TODAY AS THEY WERE IN 1913: "PUBLICITY IS JUSTLY COMMENDED AS A REMEDY FOR
SOCIAL AND INDUSTRIAL DISEASES. SUNLIGHT IS SAID TO BE THE BEST OF
DISINFECTANTS; ELECTRIC LIGHT THE MOST EFFICIENT POLICEMAN."[2]

eBay's board has stated that our director nominees are "not qualified
candidates." What makes one qualified in their opinion? Being a large
stockholder of a direct competitor and interfering, as alleged by the
Department of Justice, with eBay's hiring practices on behalf of said direct
competitor (current board nominee, Scott Cook)? Participating in a consortium
that buys assets from the company and flips them for a quick and massive
profit (current board member, Marc Andreessen)? Failing, as alleged by the
SEC, to take steps to ensure that the accounting for stock options was proper
and agreeing to disgorgement and civil penalties amounting to over $3.5
million (current board nominee, Fred Anderson)? I have heard nothing of value
from John Donahoe or the board in response to our various criticisms – just
buzz words and consultant speak, as if repeating the mantra "world class"
enough times will make it so. I believe that our nominees look mighty
attractive when contrasted with these specimens.

Over the years, many individuals (including myself) whom we have succeeded in
placing on boards through proxy contests have routinely been asked to remain
on those boards for multiple terms due to the cooperative and congenial manner
with which they comport themselves in the boardroom with their fellow
fiduciaries. And I believe it is extremely difficult for one to argue that our
strategy of obtaining board representation with the goal of restoring a sense
of accountability in the corporate suite (which we attempt to employ not only
in our investing activities but also in the management of our controlled
operating companies) has not been successful. From the beginning of 2000
through the end of last year, the trading price of the stock of my holding
company, Icahn Enterprises L.P., increased 1,662%, as compared to 64% for the
S&P 500 Index over the same period. It is often the case that only one fresh
voice in the boardroom, though he or she may be outvoted in terms of sheer
numbers, is all it takes to end years of undue deference to management.

I have been so successful with companies over the years because I have brought
in the right CEO. Sometimes convincing boards to make changes takes years, but
when change ultimately comes the results are often startlingly good. In just
the last year, simply examine our successes at Forest Laboratories and
Chesapeake Energy. We believe that at the very least, eBay stockholders must
send Donahoe and the board a message that we are very unhappy with the current
situation at eBay. In addition to the egregious issues surrounding the Skype
transaction, it should also be noted that in just the past year eBay has
underperformed its peers. Indeed, from January 1, 2013 through our initial
involvement on January 10, 2014, Amazon, Visa and MasterCard returned 60%, 48%
and 73%, respectively, while eBay stock returned only 2%.

In our opinion, eBay and PayPal should immediately be separated. It is my firm
belief that if this occurred, there would be a number of bidders willing to
pay a large premium for an independent PayPal. However, on the other hand, I
fear that if left under the management of eBay it will "wither" (as Elon Musk
said). I believe that if it is left as a division of eBay, PayPal may well go
the way of other former technology greats such as Blackberry, Dell, Eastman
Kodak, Polaroid, Nintendo, Xerox, Sony, Palm, and AOL – the same way that
Motorola Mobility may have gone had we not been able to convince Motorola's
board to bring in a new CEO and separate the companies – ultimately resulting
in a sale to Google.

Sadly in our opinion and the opinion of others eBay does not have years to
wait. PayPal is a great company, but it is going to war against strong
adversaries such as Google, Apple, Visa, etc. To win a war, you need to have
great generals that have proven their competence and loyalty. Unfortunately,
it is obvious to us that this is lacking at eBay and PayPal. PayPal must be
separated NOW so that great management can be attracted – management that can
make the right decision and know when to sell at the right time, not the worst
time.

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

If you have questions or need assistance in voting your shares, please call:

Georgeson

480 Washington Blvd, 26th Floor
Jersey City, NJ 07310
(Toll Free) (888) 497-9677
E-mail: spinpaypalnow@georgeson.com

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 PRELIMINARY PROXY
STATEMENT ON SCHEDULE 14A FILED BY CARL C. ICAHN WITH THE SECURITIES AND
EXCHANGE COMMISSION ON MARCH 11, 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] See Ed Hammond et al., Ebay chief defends keeping PayPal, The Financial
Times, March 6, 2014 [emphasis added].

[2] Louis D. Brandeis, "What Publicity Can Do," Harper's Weekly, December 20,
1913.

SOURCE Carl C. Icahn

Contact: Susan Gordon: (212) 702-4309
 
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