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LinkedIn co-founder Hoffman sides with eBay in Icahn battle

Reid Hoffman claims that Carl Icahn's idea of spinning out PayPal from eBay is short-term thinking that treats the payment platform as a "cash cow that's ready to be slaughtered."


LinkedIn co-founder Reid Hoffman says the battle between eBay and activist investor Carl Icahn exemplifies the fundamental difference between the culture of Wall Street and that of Silicon Valley.

He penned a blog post on Wednesday that balked at Icahn's idea of spinning out PayPal from eBay. He said that it appears Icahn doesn't understand Silicon Valley's culture of focusing on long-term growth and instead is just looking for quick returns on Wall Street.

"While PayPal is no longer a startup, it still has massive growth prospects. But to someone who isn't investing in the long term, it's just a cash cow that's ready to be slaughtered," Hoffman wrote. "Icahn is determined to manufacture consent for a spin-off, then a sale, so he can make a quick profit on that PayPal premium."

The riff between Icahn and eBay stems back to January when the investor bought a chunk of shares of the online marketplace's stock. A few weeks later he published an open letter to eBay shareholders saying that PayPal should be spun off into its own company in order to increase shareholder value.

Since then, a host of big-name Silicon Valley executives have criticized Icahn's plan, including eBay's founder, board chairman, and largest shareholder Pierre Omidyar and investor and eBay board member Marc Andreessen.

Hoffman is the former executive vice president of PayPal and helped engineer eBay's buyout of the payments company. In his blog post, he said the acquisition was key to PayPal's success because it's been able to get higher profit margins from transactions on eBay. PayPal being tied to eBay is no different than Amazon, Google, and Apple having their own payment platforms, he wrote.

"While Carl Icahn is insisting that eBay and PayPal are two 'disparate businesses' with 'two very different business platforms' that should separate in order to improve their effectiveness, everyone else in the space is converging as furiously as they can," Hoffman wrote.

"In the end, Icahn's stock in trade is trading stocks," he continued. "Silicon Valley's stock in trade is creating powerful products and platforms. The former approach creates short-term returns. The latter approach creates economically productive ecosystems that spawn industries, jobs, products, and services that benefit society at large, and compounding profits for long-term shareholders."