Last month eBay said Icahn was seeking a non-binding shareholder resolution to spin off PayPal. At the time Icahn also nominated two of his employees for eBay's board. EBay said then that it had looked into a split from PayPal, but felt it wasn't the best move for shareholders. The company has also said that its board nominating committee will review Icahn's nominees in due course.
PayPal, which eBay bought for $1.3 billion in late 2002, is now growing faster than the company's core marketplaces business. In the fourth quarter, payments revenue of $1.84 billion accounted for about 41 percent of total revenue for the period. Recently, PayPal has been expanding into brick-and-mortar stores from serving solely as an online payments service.
Icahn argued in his letter that splitting eBay and PayPal "would provide employees and stockholders the best opportunity to remain competitive over the long term."
EBay said in a statement that its board regularly looks at its strategic options and should circumstances around PayPal change, its board "is entirely capable of evaluating alternatives for optimizing shareholder value."
In his letter, Icahn also alleged that some eBay board members have conflicts of interest. Among those to catch Icahn's fire: Scott Cook, who is the founder and former CEO of Intuit Inc. and is a current board member for the company. Icahn questioned Cook's involvement on the eBay board, saying that Intuit and PayPal are direct competitors. Icahn also questioned Marc Andreessen's loyalty to eBay, claiming he was able to achieve significant personal financial benefit from buying large stakes in two former eBay subsidiaries.
Icahn also drubbed eBay CEO John Donahoe, saying he seems to "lack awareness about what is going on around him on his board and in the marketplace."
EBay defended itself, saying in a statement that its board is "scrupulous in its governance practices and fully transparent with regard to its directors' other affiliations and businesses."
EBay also said that Icahn used old news clips and took anecdotes out of context to attack Cook and Andreessen's integrity. In addition, the company said that Donahoe is "widely respected for his turnaround of eBay and leadership of the company over the past six years."
EBay shares rose $1.52, or 2.8 percent, to $56.11 in morning trading Monday. Its shares are up almost 2 percent for the past year.