The greatest Carl Icahn photo is the one on his Twitter bio, but there's no shortage of good ones. Photographer: Tim Boyle/Bloomberg News.
The greatest Carl Icahn photo is the one on his Twitter bio, but there's no shortage of good ones. Photographer: Tim Boyle/Bloomberg News.

Here's something that EBay said on its blog yesterday:

Last week eBay Inc. CEO John Donahoe got a call from investor Carl Icahn. Mr. Icahn is a new eBay Inc. shareholder who is pretty excited about the potential of PayPal (we are, too). In fact, he thinks PayPal would be even better as a separate company.

We have tremendous respect for Mr. Icahn, so if he wants to talk with us, we’re happy to listen — just like we’ll do with all of our shareholders.

They also filed that in a proxy solicitation document -- because guess what, proxies are gonna be solicited -- so I guess it must be true? It seems untrue. The last part, I mean, "just like we'll do with all of our shareholders." Does the chief executive officer take all of their calls himself?1 If I went and bought one share of EBay could I get a phone conversation with the CEO to air my grievances, and then a follow-up blog post and Securities and Exchange Commission filing responding to those grievances?2 I have lots of grievances, not really at EBay but I'm sure I could think of some for the purposes of this hypothetical.

Of course Carl Icahn doesn't own one share; he owns around 10 million shares.3 That's a lot of shares! I mean, sort of. It's only 0.82 percent of the company, and it makes Icahn EBay's 29th-largest shareholder.4 It's not that many shares. He couldn't, like, mount a proxy fight with just 0.82 percent of the shares.

Oh, hmm:

The company also announced today that it has received a notice from Carl Icahn indicating that he has nominated two of his employees to its Board of Directors and submitted a non-binding proposal for a spinoff of its PayPal business into a separate company.

So, I mean, obviously you can submit all the non-binding proposals you want. Any shareholder can do that. And anyone can "nominate" directors, in the sense of sending the board a letter saying "you should hire these guys." I guess it's possible that that's what Icahn is up to. (Not really, but EBay says "His Board nominations will be passed on to the Board's Corporate Governance and Nominating Committee, which will consider them in the ordinary course of business.") But actually getting them on the ballot, over management's objections, requires an expensive proxy fight, which is normally the province of activist shareholders whose stakes are big enough both to justify the expense and to influence the outcome. Icahn's $500-million-ish 0.82 percent stake here might justify the expense, but it's hard to see it influencing the outcome much.

Why is Carl Icahn turning his attention from small situations where he can amass big, sometimes controlling, stakes and exert his will, to big brand-name companies such as Apple and EBay where he has to win public relations campaigns through nothing more than the force of his arguments and the careful editing of his tweets? (And where one obvious activist tool -- pushing the company to sell itself, or trying to buy it himself -- is pretty unrealistic. Nobody's gonna buy Apple, and even EBay, at a $70 billion market cap, would be a lot to swallow.)

I don't know. One obvious possibility is just, he's Carl Icahn, he does what he wants, and he can get more attention and have more fun talking about Apple and EBay than he can taking over and monkeying with CVR Energy.

Another possibility is that he has determined that his best skills are not in the machinery of activism -- stake-building and proxy fighting and corporate-structuring -- but rather in developing corporate strategies and persuading neutral observers that he is right. That ... would be a little weird? Why would a legendary corporate raider's comparative advantage come in corporate strategy rather than in corporate raidering? The evidence is a little mixed. EBay, for instance, jumped on the news he was involved, but then settled back on a fairly meh reaction to his actual proposal. (On the other hand, his corporate raidering in Dell didn't really go so hot either, though it made him -- and other shareholders -- a little money.) It is true, though, that Icahn's ability and willingness to get on television, be amusing once he gets on, and tweet his investment ideas all make him one of the more, let's say, visible activist investors around. Anyone can nominate directors; few people make for must-see financial TV.

A third possibility is that the big companies are where the opportunities are. You could even imagine that activist hedge funds have become so powerful, so feared and so important that lots of small and mid-sized public companies that perceive themselves as being vulnerable to activists have already proactively done all the things that activists would want. Remember that banks' activist-preparedness advice includes things like, "value-boosting transactions -- such as spinoffs, splitoffs and carveouts -- to help deter activists." If all the vulnerable companies are doing spinoffs before Icahn even asks them to, the only way for Icahn to make money is by proposing spinoffs to the invulnerable companies. Presumably Apple and EBay spend less time with anti-raid bankers than smaller companies do. And now they pick up the phone and, bam, Carl Icahn.

One related but sort of opposite possibility is that anti-activist defenses do their jobs really well. In particular, the anti-activist poison pills that lots of companies have put in recently when they find Icahn or his friends sniffing around make it really difficult for activists to accumulate concentrated stakes and to coordinate with other large shareholders.

If you can't get a concentrated stake in a company, then you can't win your fights with concentrated stakes. That means you might as well focus on big companies: You get more media (and investor) attention that way, for one thing, and if you're relying solely on persuasion, that matters. For another thing, you get to put more money to work: Icahn's $3 billion-ish investment in Apple represents under 1 percent of the company's stock, but means that he makes $30 million for every percentage point he can push up the stock. Meanwhile Icahn's investment in Hertz is capped at 10 percent of the company (about $1.2 billion) by Hertz's poison pill, and realistically to even less,5 limiting the amount of money he can make for his efforts. If you're a big activist, the play used to be to build a big position in a medium-sized company. Now that's much harder, and building a small position in a big company might offer more value for money.

1 To be fair, nothing in that blog post specifically says that Donahoe took Icahn's call. Maybe the conclusion that Icahn is "pretty excited" came from listening to a voicemail. I bet you could tell that Icahn's excited from a voicemail.

2 Responding by brushing them off, but still.

3 He told EBay "that companies controlled by Mr. Icahn had, earlier this month, acquired shares and derivative securities that give him an economic interest of approximately 0.82% in the company." There are about 1.29 billion shares outstanding. So about 10.6 million shares, or around $550-$600 million worth, most of it probably in put-call combos to avoid antitrust restrictions.

4 Per Bloomberg EBAY HDS, obviously things could have changed a bit since everyone's last filings but something like that anyway.

5 Practically speaking he probably needs to stay well below that limit if he wants to coordinate with other shareholders, etc.