PayPal and the Activist Campaigns That Didn’t Work

One of the more fun business stories of recent weeks was the pressure campaign waged by an activist investor against—wait for it—Carl Icahn, an activism icon for decades! Few other activists run public companies, as Icahn does, so we’re unlikely to see something like this repeated. But it is a good reminder that activists, who like to point out where CEOs go wrong, aren’t exactly infallible. One common activist shortcoming is failing to correctly assess what ails a target company. That usually becomes clear when the activist succeeds in replacing a CEO or gets board representation, and the target’s business and stock price don’t improve. And that happens more than perhaps is widely acknowledged.

Take PayPal, which today named an Intuit executive, Alex Chriss, as its new CEO, just over a year after Elliott Management appeared on the scene as a shareholder. It’s reasonable to think Elliott helped pressure CEO Dan Schulman to step aside, even if the activist wasn’t—as this CNBC story reports—involved in the selection of the new CEO. Elliott also likely helped push PayPal to cut costs, which has helped juice profit growth over the past few quarters. But there’s precious little evidence that Elliott has achieved much else. PayPal stock is trading below where it was before news broke of Elliott’s interest. And PayPal’s revenue growth rate, which last year fell from the roughly 20% level it had hovered at for many years to 8.5%, has slowed even further, to 7.8% in the first half of this year.