EBay said Wednesday that activist investor Carl Icahn is calling for the e-commerce company to spin off its PayPal payments division. The company rejected the idea, but it did unveil a new $5 billion share-buyback program, likely designed to placate any investors who are unsatisfied with the company's recent performance and its large cash position. EBay shares jumped 5% to $57.12 in after-hours trading following the news. Icahn nominated two of his employees to eBay's board and submitted a non-binding proposal for a spinoff of PayPal into a separate company. Icahn owns stock and derivatives equal to 0.82% of the company, eBay noted. " EBay's Board of Directors routinely assesses the company's strategic direction and has explored in depth a spinoff or separation of PayPal," the company said in a statement. The board "does not believe that breaking up the company is the best way to maximize shareholder value," eBay added. An avid activist Icahn is one of the best-known activists, a type of investor who takes large positions in companies that are either under-performing or sitting on a lot of cash. These investors usually push management and directors to change strategies, sell the company or return money to shareholders through share buybacks or increased dividends. Icahn has been hounding Apple to return more of its $150 billion cash hoard to shareholders. On Wednesday, he announced an increased investment in Apple and tried to exert more pressure on the company. Icahn also hinted that he would reveal his next activist target, which turned out to be eBay . The idea of a PayPal spinoff has been discussed on Wall Street several times in recent years. The abrupt departure of PayPal President Scott Thompson raised the issue in early 2012. Where it began PayPal started life as an independent company, founded in the late 1990s by technology entrepreneurs, including venture capital investor Peter Thiel . It battled with eBay for supremacy in the emerging online payments market. But soon after PayPal went public in 2002, eBay acquired it for $1.5 billion . PayPal thrived as the main way to pay on eBay's online marketplace. Then it expanded to other e-commerce sites. Now PayPal, under new President David Marcus , is trying to provide payments in physical stores. That is a huge opportunity, although the project is progressing slowly. Meanwhile, eBay's main online Marketplaces business has struggled to keep pace with Amazon and the growth of e-commerce in general. There has been some improvement in the past year or two; however, the PayPal business accounts for a substantial portion of the total market value of eBay . Having a faster-growing business buried in a larger company sometimes makes it hard to attract and retain executives. If executives running the faster-growing part have equity in the holding company, they may not see their wealth increase in line with the more successful unit. This can make them more prone to being poached by rivals.
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