
EBay is worst-run company I have ever seen: Carl Icahn - mathattack
http://www.cnbc.com/id/101467290
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debt
Carl Icahn gives a great talk as a guest lecturer in Robert Shiller's economic
class from 2009: [https://itunes.apple.com/us/podcast/15-guest-lecture-by-
carl...](https://itunes.apple.com/us/podcast/15-guest-lecture-by-carl-
icahn/id341651121?i=63752219&mt=2)

He talks about how many of these companies are run by fraternity presidents
and their frat brothers. He calls it anti-Darwinian. You have this likable,
but dumb, frat president coming in and becoming CEO. He theorizes that people
who float to the top in companies are those who pose no threat and take no
risks. So you have the dumb frat president will in turn appoint his frat
brother, who subsequently is dumber than him and rose in ranks because he
poses no threat to anyone, as his successor, and so on.

He seems frustrated that many of these companies have no accountability, they
essentially can do whatever they want. And many times, the smartest people
don't float to the top as they should.

So I see Carl Icahn coming in and giving these guys a hard time and can't help
but think it's a good thing. Good shake em up a bit.

But are activist investors like Carl Icahn actually a good thing? I mean it's
great that they introduce a bit of corporate democracy, but does he actually
improve the companies he takes a large position in?

~~~
mcnees287
This is an interesting comment, but Icahn's recent actions (last three to four
years that I am familiar with) are driven by nothing more than the motive for
short-term profit.

The process proceeds along the following lines:

1\. Acquire a stake of more than 5%, which requires a public filing with the
SEC. This is very key as now the public has a verifiable way of knowing Icahn
has a stake.

2\. Write a letter to the board and/or management demanding changes to the
structure of the company or use of its large cash pile(if applicable). This
usually takes the form of a spin-off or buyback/dividend proposal. (Buybacks
are more favorable these days due to tax considerations.)

3\. The stock price increases at least 10% after it is announced Icahn has
taken a stake. Icahn can sell here and take his profits home; 10% annualized
is a very large gain.

3\. Management predictably scoffs at Icahn's demands or arranges a show for
shareholders in the form of a one-on-one meeting with the CEO or something
along these lines. Nothing tangible happens.

4\. Icahn sometimes is able to pressure firm management/board into buybacks or
dividends, which only adds to Icahn's paper profits (see 3). This is usually
done through the very real threat of going directly to the shareholders with a
proxy to elect new board members. Even if this is unsuccessful Icahn still has
achieved 3.

This is known as the 'Icahn tax'. Due to name recognition and a strong track
record Icahn is able to exert pressure on firms for a quick and easy buck.
Nothing more.

~~~
nostrademons
Who's the tax on? If I'm understanding the dynamics here, it looks like it's a
tax on shareholders who buy in at inflated prices because Icahn is being an
activist, and that once he sells his shares, everything will return to normal.
If that's the case, then over time people should realize that Icahn buying
into a company is a signal that it's overvalued and that premium should
decrease. (In the meantime, he gets to bank large profits off this trade, but
his name recognition and track record is a depreciating asset unless he
actively improves stock performance.)

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adventured
This is pretty straight-forward:

"The billionaire investor has been trying to get the online marketplace for
months to spin off its PayPal platform from its Internet retail business."

The longer eBay refuses, the more obnoxious and louder Icahn will get. He will
say _anything_ he has to about eBay to try to force them to do what he wants
them to. That's his M.O. in dealing with boards. He's an actor that puts on an
overly dramatic show, trying to lure other shareholders to his position (and
it helps get media attention).

This is not about whether eBay actually is the worst-run company ever (talk
about dramatic), this is about trying to force eBay to spin off PayPal. Icahn
believes that will unlock value for him, after which he'll sell out of eBay /
PayPal at a profit and never look back. This fake concern about how eBay is
run, will magically disappear from his list of priorities (ie he's nothing but
a shark, and his post-sale behavior every-single-time proves that).

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jcampbell1
I knew Andreessen bought Skype from ebay, and flipped it to Microsoft for a
massive profit. I had no idea he was on Ebay's board.

That looks really bad no matter how you spin it.

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ChuckMcM
Unlike Warren Buffet, Carl Icahn only buys into companies he thinks are run
poorly. Usually he is able to push the company around to make a profit. He
also thought Apple was pretty poorly run but he gave up[1] trying to convince
others of that.

[1] [http://www.forbes.com/sites/genemarcial/2014/02/14/whats-
up-...](http://www.forbes.com/sites/genemarcial/2014/02/14/whats-up-with-carl-
icahns-about-face-on-apple/)

[1b] [http://www.reuters.com/article/2014/02/10/us-apple-icahn-
idU...](http://www.reuters.com/article/2014/02/10/us-apple-icahn-
idUSBREA1913T20140210)

[1c] [http://www.foxbusiness.com/investing/2014/02/11/icahn-
apple-...](http://www.foxbusiness.com/investing/2014/02/11/icahn-apple-stock-
is-extremely-undervalued/)

~~~
cjensen
It's not true that he buys "poorly" run companies. He buys companies where he
thinks a simple change could make a big short-term profit for him, and then he
lobbies for that profit.

In Apple's case, Apple looked really smart in 2008 for having money in the
bank when there was a cash crunch in money market funds and people had trouble
getting short-term operating funds. They look smart when they use their funds
to lock up a bunch of Flash Memory for their devices rather than buying as
they need at higher prices.

But Icahn didn't care about the long term advantages of the bank account to
Apple. He just cared about trying to squeeze some of it out in the short term.

~~~
ChuckMcM
Agreed, when I read the article I objected to the headline. Icahn's definition
of 'poorly' seems to me, to really be "These guys are leaving money on the
table." I do not believe that in the classic sense of 'earning money, meeting
goals, and running the business' that Ebay is "poorly" run, but I would agree
with an assessment that there are probably ways for them to increase the
amount of money they either make or retain.

However, my experience is that companies that are hell bent on getting every
penny out of the business are not generally "well" run (again by my definition
of what "well" means).

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PaulHoule
I can't remember the last time I bought or sold something on eBay. For any
specific thing there is always some channel which is better, and that's the
problem.

As for PayPal let's just say I lived through the age of PCI Compliance when
PayPal was the most common option if you needed to take credit cards for a
small business and that experience will take a long time to live down.

~~~
cwal37
I haven't bought anything on ebay proper in quite a while, although I
occasionally buy books from half.

However, my girlfriend buys a large quantity of good from eBay. These
purchases seem to fall into two categories.

1\. Clothing. In particular, very cheap dresses and clothes that are out of
stock and discontinued on the brand's website.

2\. Craft goods. Leather to make purses/wallets and scrap kimono silk are two
examples that spring to mind immediately.

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Locke1689
Andreesan seems to have a credible defense, but Ebay's excusal of Scott Cook
(who is being investigated by the DOJ for antitrust action in a non-poaching
agreement with his company Intuit) seems pretty damning.

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ap22213
What are the top competitors to EBay?

~~~
showerst
Amazon Prime and Craiglist for two.

Nowadays Ebay is still the place to buy and sell specialty items, which will
always be a multi-billion dollar market, but they've lost their position as
the marketplace of the internet.

If I were Ebay I'd also worry that thanks to Stripe it's quickly becoming much
easier to become the marketplace for a given category, and beat Ebay via
specialization.

~~~
alaskamiller
I've been on eBay since 2002. It's only in the past 6 months that I finally
got how great eBay really is.

Before I make any purchase on Amazon these days I always double check with
eBay and ever single time eBay has been able to beat Amazon prices.

With same if not better checkout experience, faster shipping prices and access
to Asian marketplaces; it's the jumpoff point before I hit up DealExtreme or
Alibaba.

Plus no sales tax.

Plus eBay bucks.

But I'm hesitant on telling more people about this secret because I don't want
the cheap prices to go away.

~~~
dublinben
I think it really depends on what you're buying, and what kind of quality you
need. eBay is great for cheap electronics that don't really need to work, but
I'm not going to buy my food there.

~~~
alaskamiller
I buy new/used CPG, electronics, medicine, and food on eBay. On average 5%
cheaper than Amazon. Business wise, eBay/PayPal makes 15% off transactions
without having to spend on COGS or warehousing.

It's incredible. Jeff Bezos lost. No one gets it yet.

------
gesman
Never underestmiate the power of billionaire's boredom.

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NextUserName
> _The billionaire investor has been trying to get the online marketplace for
> months to spin off its PayPal platform from its Internet retail business._

The poor billionaire is used to getting his way and now he is pouting and
ranting... Sniff.

I know two accountants that used to work for Ebay. By what they told me it is
not poorly run at all. Not in any capacity. What single shred of evidence is
there that EBay is the "worst-run" company he has ever seen? or even that they
are tun badly at all?

If it were the worst run company he had ever seen... how are they still in
business? They should be hemorrhaging money and laying off employees. You'd
think that corruption, scandal and theft would be rampant for such a poorly
run company. Their servers would be down all the time, they would get hacked
constantly and erase their data by accident without having backups. Their web
IU would be unusable, their site would be full of bugs, they would be
constantly being audited by the IRS, They would be in the business news daily
for their constant blunders.

This reeks of pouting and sour grapes.

