Icahn Vs. Andreessen: Battle Royale

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Why can’t Carl Icahn and Marc Andreessen get along?

Icahn, the billionaire activist investor, has been pushing eBay to spin out its PayPal division, while Andreessen — acting in his capacity as a director on eBay’s board — is siding with the eBay chief executive against the PayPal spinout.

So Icahn has been attacking Andreessen and fellow board member Scott Cook, Intuit founder, in an effort to get them booted from the eBay board. The argument, which Icahn keeps hammering, is that Andreessen’s day job as a venture capitalist and Cook’s position as a prominent tech exec, raise conflicts of interest that cannot be sufficiently addressed.

One of Icahn’s chief concerns is Andreessen’s alleged involvement in the sale of Skype to a consortium of private equity investors that included Andreessen Horowitz.

In a letter issued to eBay shareholders Monday, Icahn again called for eBay to come forward with a full accounting of Andreessen’s involvement in the sale of Skype:

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.

The letter continues:

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.

Oh snap.

Andreessen posted his (more terse) response on the Andreessen Horowitz website — and tweeted it — a bit later in the day.

“I dispute all accusations that I have violated any of my duties to eBay shareholders,” Andreessen wrote, before engaging in a point by point rebuttal of Icahn’s claims.

From the letter:

* Throughout the eBay board’s process of divesting Skype, I fully disclosed my potential interest and recused myself from all deliberations on the transaction, including all discussions, negotiations, and decisions. I was uninvolved in eBay’s decision to spin off Skype and in eBay’s decision to choose to partner with the Silver Lake syndicate.

* eBay’s retained ownership in the Skype spinoff was 30% vs. Andreessen Horowitz’s approximately 3%. That much larger ownership gave eBay a far bigger role in decision making on Skype after the spinoff than Andreessen Horowitz, as well as a far bigger economic payoff on the sale to Microsoft.

* Subsequent to the Skype transaction, I was re-elected to the eBay board in 2012 with virtually unanimous support — 99.7% of votes — of eBay shareholders. The Skype transaction received a high degree of public scrutiny when it happened; all of the facts around my role in the Skype transaction were fully public at that time; eBay has a very sophisticated body of shareholders; and if any of them saw any problem with my conduct around the Skype transaction, I am confident that they would have brought it up by 2012.

Behind all the sound and fury is one fact: If Icahn can get enough shareholders around to his way of thinking about eBay’s current board, he can potentially install a new slate of directors (he’s already nominated two people from his firm) more amenable to his push to spin out PayPal.

The hubbub dates back to January, when Icahn first disclosed his investment in eBay. At the time, analysts dismissed the idea of breaking up the company, but said Icahn’s investment would be good for the stock.

And those analysts would be right.

What remains to be seen is whether a successful Icahn run at eBay’s current slate of directors will change investor sentiment. In other words, investors may like Icahn’s money, but would they actually like his ideas on what to do with eBay?