Activist investor Carl Icahn, who has been calling for eBay to spin off PayPal, is now asking for eBay to conduct a partial initial public offering of the payments processor.

A 20% sale of PayPal to the public would create two "dedicated and highly-focused independent businesses" while preserving all synergies between the two companies, according to a statement released on Shareholders Table, a site affiliated with Icahn.

"This type of relationship is customary in partial IPOs and would be particularly important for eBay as currently, outside of PayPal, there does not exist a global payment processing solution competent enough to service eBay's users," Icahn writes. "Luckily for PayPal, competitors such as Google, Apple and many others do not yet have the same comparable scale and product offerings."

Both eBay and PayPal are tremendously strong businesses, but they appeal to different types of investors, Icahn says. "We expect that an IPO of PayPal, thereby creating two focused entities, each with clear prospects and strategies for investors and analysts to consider, would enable both companies to attract a more natural shareholder base," Icahn writes.

eBay responded in a press release, saying "PayPal is thriving as part of eBay Inc. Being part of eBay Inc. for more than a decade has enabled PayPal's strong growth and global leadership position in digital payments. PayPal has not been held back by eBay Inc...A partial separation of PayPal is not a new idea, and we're glad to see that Mr. Icahn now seems to agree that a full separation of PayPal is not a good idea."

Experts have viewed a PayPal spinoff as unrealistic, predicting that if eBay and PayPal were to separate, eBay might have to develop a new payment system in-house.


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