Markings of a Private Settlement with Icahn? Andreessen’s Resignation from eBay’s Board Raises Questions
Carl Icahn has earned his reputation as the world’s most successful activist investor by almost never backing down from a corporate confrontation. This is what made his decision last April to walk away from a very public and bitter battle with eBay’s Management Team and Board of Directors so peculiar. Recent events, however, highlighted by Monday’s news that noted venture capitalist Marc Andreessen is stepping-down from the board of directors of eBay, appears to raise the prospect that the Icahn’s capitulation at the time may have been part of a private settlement with eBay’s Board of Directors.
Icahn’s clash with eBay began back in January of this year when it was disclosed that his firm had taken a 2% stake in ecommerce giant. Shortly thereafter, Icahn began to push for 2 seats on eBay’s Board of Directors as well as for the company to spin-off its PayPal electronic payment unit. As eBay's fastest-growing division, Icahn believed that PayPal would benefit significantly from a separate management team that would place the company in a position to pursue its substantial growth potential.
eBay's Board, however, rejected Icahn's proposal. Undeterred, Icahn changed course and began a very public campaign to highlight eBay’s corporate governance, which he claimed was the worst he had ever seen. At the crux of Icahn's governance crusade was an alleged conflict of interest involving eBay board member Andreessen and his role in eBay’s sale of Skype to an investor group in which Andreessen’s investment firm held a stake. In his now infamous letter to eBay’s shareholders, Icahn opined that he viewed eBay’s Annual Meeting coming up in May as a "watershed moment" for shareholders everywhere. He argued that in order to create an optimal environment for investment in America's public companies, institutional investors needed to "stand up" and hold eBay's Board of Directors accountable for blatant conflicts of interest and self-dealing.
Nevertheless, the watershed moment never happened. Almost a month before the Annual Meeting, a settlement was reached between Icahn and eBay. Icahn ended his proxy fight and abandoned his demand for two of his employees to serve on eBay’s board. eBay’s concession? David Dorman, the former CEO of AT&T would join the board as an independent director. The resolution was hailed by many as a victory for eBay and a symbolic stand by Silicon Valley against Wall Street. To the investment community, however, Icahn’s withdrawal seemed completely out of character and doubts were cast on the sincerity of the resolution.
Fast forward six months and the suspicions regarding the genuineness of the settlement appear to be well-founded. In a surprise announcement a few weeks ago, eBay declared that it would spin-off PayPal next year into a separately traded company and that CEO John Donahue and CFO Bob Swan would be leaving the company. Analysts were still evaluating the impact of the spin-off, when the news came this morning that Andreessen was resigning from eBay’s Board. Andreessen took to twitter to state that he was stepping down from eBay’s Board.
Perhaps it is all just a coincidence, but given Icahn’s penchant for victory one has to consider the very real possibility that these recent events are part of a carefully orchestrated private settlement between Icahn and eBay’s Board of Directors. The reality is that eBay could not have afforded a bloodbath at the Annual Meeting which might have reduced shareholder support and subjected the company’s corporate governance to increased scrutiny. Thus, it is entirely within the realm of possibility that eBay’s Board entered into a private settlement with Icahn in which he would walk away from the proxy fight, in exchange for which he would receive an assurance that: (1) PayPal would be spun-off in the next year (providing him with a substantial return on his investment); (2) Donahue and Swan would no longer remain with the company; and (3) Andreessen would step down from eBay’s Board.
Icahn did tip his hand at the time of the public settlement when he stated that it is “better to have peace than war.” That is not Carl Icahn. He lives for the confrontation -- provided it is calculated to lead to his objective of making money. As we now know, he accomplished both with his investment in eBay.
Mark Rogers is a corporate governance expert and the CEO of BoardProspects.com, the world’s largest online boardroom community.