Carl Icahn: eBay, PayPal Should Still Be Separated

You know, Carl, I got to say I was a little surprised when I got this news because I know that you've had some pretty choice words all along for management and for some of those board members. But now it seems as though you guys are coming to an agreement. What made you change your mind?

You know, I mean, I look at these, all of them, that peace is better than war. I mean, if you look back, if you look at our record and when we got on boards over the past five, six years, all you had to do was buy the stock, and you did great, and we got this confidentiality. We did terrific on those. I mean, just look at a few of them. On an annualized basis, if you just bought the stock, when we did the confi, we got on the board on it.

I know you wanted to see PayPal being spun off. Are you going to continue to push for that, maybe in a less public way?

Well, I tell you this. I've said that we believe that PayPal and eBay should eventually be separated. After talking to John, after looking and studying this company, I really think there's such a huge potential in PayPal right now that it's almost a mistake to do it right now. I sort of agree because why should they sell stock of PayPal to the public now when you believe it's going to increase dramatically over the next few years? And if you look at it, PayPal is a bit of a, you know, I like to call it no-brainers. I mean, you're not always right, but I mean, it's a little similar. Well, we said Netflix is a no-brainer. I mean, at this level, because...

I know, but, you know, Carl, you said that spinning off PayPal was a no-brainer. I'm just curious, what exactly made you change your mind here? You know, several weeks ago, you hadn't yet spoken to the CEO. It seems that you did have a conversation with him. How did that come about, and why did you change your mind?

Well, Leslie, you've asked so many questions, I don't know where to start. All right, so why don't you change your mind? I think it will take all day to answer them if I can remember them. So why don't we start with changing your mind? Who thought of that? Okay, to begin with, we talked to a lot of shareholders over this period of time, and some of them are pretty intelligent guys. And, you know, some of these institutions that really have lived with this company for a number of years, and a lot of them don't want to see it split up for the following reason. A few of them make, you know, really have a real, very strong feeling that at this point in time, why split it up? And they believe, I mean, it's sort of anti-intuitive to a short-term investor.

And I want to make it clear, we're not short-term investors either. I've kept stuff seven years, eight years, ten years. This is the new mantra: short-termism. And the reason that they don't want to do it is they feel that PayPal will be taken away from them. In other words, some big acquirer will come in and even pay a premium. They're not interested. They say, "Hey, look, this thing has got so much potential. Why do it now?" And I think that, frankly, I'm not speaking for John Donahoe. We've had some great conversations, but I think he also has that same thought, that this company is really cheap now. And when you really dig into it, I came around to that thinking, you know, as opposed to saying, "Well, you know, let's, let's spin it off," and you don't have to do it now.

I believe the question is not if it's going to be done, but when. Frankly, I don't think I would have won the precatory anyway. I mean, you know, if you know you're not going to win, why just fight the war just for the hell of fighting it?

Did you know you were not going to win because the institutional shareholders were not there?

I think that, you know, first of all, you've got the chairman voting against us. That's 8%. And a few of these large institutional shareholders, I'm not going to name who, have great belief in this company and the potential. And I don't think they would have voted for me in a precatory. Not in the precatory. I might have won a seat on the board. But I wouldn't have won the precatory anyway. So it's easy to change your mind when you're not going to win. And we wouldn't have. And that's the precatory.

So you wouldn't have won this one. So it made more sense for you to work with him.

Well, remember, I'm saying the precatory. I want to make it clear. I don't say I wouldn't have won a seat on the board. But I don't think – I say that strongly. I do not believe I could have won the precatory anyway. So it's easy to change your mind on that. But I really did change my mind. I do think that – the company will be spun off eventually. I still believe it should be. But I don't think there's a rush to do it.

Are you going to stay in the stock, Carl, until it does get spun off?

You know, I don't talk about my future commitments, but I do stay a long time in companies, and I really think this company is greatly undervalued. I mean, I've said it about the other companies I'm in. So I believe Apple's undervalued. I believe Herbalife's undervalued. So, I mean, if you could ask me about three or four of them, yeah, I think this company is very undervalued. So, ergo, I don't talk about positions, but I think you can deduce from that that I'm not going to be selling it.

In fact, I might be buying it.

You might be buying eBay right now?

I'm not going to tell you what I'm doing right now.

Speaking to you, which I enjoy greatly.

And likewise, I enjoy it as well. Okay, David Dorman, he's the independent director that has been named to the board. How did he effectively become Switzerland here, where both John and you were agreeing on him?

Well, here's what happened, and I've said this before, but, you know, we—I was having a conversation with Jimmy Lee, who comes up occasionally to the office. We had it planned for a long time, so it wasn't about this. You know, just talking about some other business things. And you get with a few people. And then he brought up the fact, he said, 'I don't know why you guys are fighting. I mean, John's a smart guy, you're a smart guy, why don't you start talking?' I said, 'I'd love to talk, but, you know, Goldman never reached out to us. And, you know, you don't like to make the first move in these things.' And anyway, I wasn't sure that John wanted to talk. So he—he said, 'Let me call him.' And he called up John, who said, 'Yeah, great, let's discuss this.'

And we came up with this idea that, okay, why don't you put a third guy on? You pick him, and we'll decide if we like him. And that appealed to me. I mean, you know, maybe I would win a seat. I thought I might win a seat. But they agreed that would give me a confidentiality, which is the thing I was talking about, that we've had such great success with. I mentioned Dave Dorman, who we had great relation with at Motorola. I mean, he, as the chairman of Motorola, and we, I think, saved the company. I mean, that's my belief, by keeping them, by separating them. And so I think he'd be a great director. And they liked him. They said, 'Great.' So, you know, I called Dave and basically, I mean, you know, he had conversations, but basically he agreed.

He agreed that, you know, he'd be part of that confidentiality. But I do think that, frankly, that John, with that confidentiality, it means I'm sort of locked in. So I'm certainly not a short-termer. I mean, we have to—you can only sell the stock very occasionally and only buy occasionally. And obviously, in other words, you have all the restrictions of a board member.

So you're there for a while. I'm curious, what is it that changed your opinion of John Donahoe? Was it Jimmy Lee?

Well, Jimmy just said he was a good guy, but actually, talking to a lot of large shareholders, they were telling me that they thought John was a very effective guy. And then, you know, John and I must have talked eight, ten hours over the last four or five days about the company, basically, the future, the potential. And, you know, I find him to be extremely passionate. That's the kind of guy I like as a CEO.

I got to tell you, Carl, it was interesting because not everyone is so outspoken against you, but this particular CEO came out. He was actually on the program with me, and he came out swinging. The company came out swinging, firing back at you. Did that have anything to do with your decision as well?

No, not at all. That was way back. He was on that program with you a long time ago. I mean, heck, there's a lot. But they put out a lot of information. I don't even remember that program, but I'll be honest with you, I did watch it. I don't even remember what he said.

But they did put out a lot of information, right? Because as you went after some of the board members, those board members were out there fighting back. Did that have any influence on your decision?

No, that had nothing to do with it. I will tell you what it had to do with it. Look, first and foremost, I want to make money for IEP, you know, and I think this is the best way to do it. But I don't think anything's really changed dramatically as far as my feelings about this. I think it's going to hopefully be split up. I can't speak for John.

Let me ask you about an op-ed that was in the paper the other day, actually just yesterday in the New York Times. You had the founders of Perella Weinberg saying that activists are basically, quote, 'a group of bullies that not only tolerate a fight, that they relish it.' And, you know, Carl, they went on to say, and I'm going to quote here, 'it's reminiscent of Joe McCarthy in the 1950s in the same way he hid behind patriotism to inflame the communist scare. Activists purport to seek longer-term value, and all they really want to do is make a quick buck.' What do you say to Joe and Peter?

You're being a little unfair about that article because I did read it. And actually, they said one good thing about us. It was almost prescient where they were talking about that, you know, activists do some good things. I remember I was laughing because it was the day before we did this thing, you know, when they're talking about Motorola and how we helped to save Motorola. And this is what we're talking about now. I think it went both ways in that article. I mean, look, I can't argue that there are some activism that are short-termism, but that doesn't mean that all activists want to be short-term and want to bully. I mean, but look at our record. I don't think they're speaking necessarily, you know, about one or two activists here.

If you look at our record, we've made hundreds of billions of dollars for shareholders. So how could you say that we just look out for ourselves? I mean, all shareholders have made a great deal. But my investments over the last decade, if you bought IEP alone, you made 1,800 percent. So, yes, I would argue at the general thing they're wrong about that. But I can't argue specifics. They also said, which I agree with completely, I believe, you know, I read it carefully, that they also said that, you know, and I agree with this, that large shareholders, you know, these index funds and large shareholders shouldn't be that passive. They should be much more involved, and I think they should.

Yeah, they did say that, and they said the analyst community as well. I mean, they were really calling on everyone to be more active. You've been very active in a company we've followed quite closely, HLF, Herbalife. Bill Ackman says he's not going to stop here until the company is out of business. He's seen some success in terms of getting the FTC to take a look at this company. They've launched an investigation. Carl, what's the latest on that? I know that you've got three board members. You've stayed involved in this company. Will you see this one through to the end?

Well, we actually went up to five board members just recently. I mean, so we are very involved with it. I mean, we're involved with it because we like it. I've said all along, I think Ackman's completely wrong on this, and that this company has—it's undervalued. Another one because of the multiple. And Herbalife gives jobs to people. I mean, it's absurd what Ackman is saying. I think his whole thesis is completely wrong. I mean, look, there are things there that he says that are sort of, you know, that they can find. There are some of these distributors that... that might be promising stuff, but that's not Herbalife promising. And Herbalife's done a great deal to change that, even where they could, you know, where they can't, where they go in and say that we don't want you to sell leads and all that stuff.

So there is stuff to that, but that doesn't mean Herbalife itself is not a very, very exciting company. It's in a market that gives jobs. I mean, the opposite of what Ackman says. They give jobs to a lot of Hispanics and Americans. I mean, I can't even understand his arguments. You read it, read it, read it. You know, if you want to. I think I'm the only guy that actually bothered to read the first report that made very little sense to me. The first one when he started. So you're sticking with it? I think it all came about because Ackman was short the stock. He may believe what he's saying. I don't know. You know, as I said, I'm, I'm not mad at Ackman anymore. I made $300 million, $400 million because of Ackman.

That's always nice. That softens any madness you might have. Real quick, before I let you go, you've been so active in Apple this year, eBay, some of these big tech names. Herbalife obviously has caught everyone's attention. Can you give us any hint at what you're looking at next or what you're excited about right now, Carl?

No, I can't. I'll just leave it at that.