NEW YORK (TheStreet) -- Facebook (FB) has lured away PayPal head David Marcus from eBay (EBAY). The move leaves a big hole in eBay's organization and an even bigger question for investors on Stocktwits.com: is a PayPal spinoff now more or less likely?
$EBAY Ichan wants to spin of Pay Pal to unlock value. Head guy leaves, people could be missing the point on another reason Marcus left? Phil (@SwedeSkyview) Jun. 10 at 09:24 AM
Activist investor Carl Icahn, who owned 27.8 million eBay shares as of March 31, has pressured the company to spin off PayPal into a separate public company.
It's not difficult to understand his reasoning. PayPal is growing far faster than eBay. The volume of payments processed by PayPal ballooned 27% in the first three months of the year. Meanwhile, the value of goods sold on eBay grew 12%. PayPal's off-eBay business grew faster than its business on eBay's site, with payments volume expanding 32% and 15% respectively. PayPal is also extremely profitable, bringing in $1.8 billion in revenue during the prior quarter.
The Icahn vs. eBay management fight got ugly at times this year, with Icahn vehemently criticizing eBay CEO John Donahoe and board. EBay's team countered with arguments that eBay's business is fundamental to PayPal's growth -- it's the way the majority of shoppers pay for goods on the site -- and that Icahn, in essence, doesn't get technology.
Until today, it seemed eBay had won the case for keeping PayPal under the eBay umbrella. Icahn backed off his campaign in April saying that, while he still believes PayPal should be a standalone company, he would pursue his agenda with management, rather than via open letters to shareholders. Investors were largely disappointed by the news of eBay's seeming success in the matter. The stock dropped 3% the day Icahn dropped his public battle.
But Marcus' departure reopens the case for a PayPal spinoff and leaves investors with new questions central to PayPal's continued success. Did Marcus leave PayPal because eBay refused to separate the company? And, if so, does that mean PayPal will lose top talent if eBay stubbornly continues to hold onto it?
If PayPal is suffering under eBay's leadership and losing top talent, than Icahn certainly has more ammunition to argue for a spinoff.
eBay, of course, argues that Marcus simply wanted to leave because he's an "entrepreneur at heart." Marcus took the job at PayPal after selling his mobile payment company Zong to eBay about three years ago for $240 million. His new role, leading Facebook's messaging products, does seem more likely to foster that spirit more than running a largely established, multi-billion payments business at an older tech company.
Some investors certainly buy that argument.