I Spent All Morning Reading About eBay’s Activist Investor So You Don’t Have To
eBay is, sadly, a troubled company. They are known to be recently laying off hundreds of employees. (I’ve personally talked to several of them) eBay has consistently underperformed the growth of its eCommerce peers.
eBay is no longer The Perfect Store. This stuff you already know.
Is this one of the activist investors?
But when you read in the news about activist investors pressuring eBay, most people don’t have the time to figure out what it’s all about. I’m here to lay out it for you in a way that helps you understand what’s going on.
WHO IS ELLIOT MANAGEMENT?
Elliot Management is an investment firm owns a $1.4B share in eBay, which is over 4% of overall shares
SYNPOSIS:
It was revealed recently that Elliot Management wrote a letter to eBay’s Board of Directors called their “Enhance eBay” plan.
It calls for three major things:
Since eBay is a mature business, eBay should continue returning a lot of money to its shareholders.
eBay needs to “stick to its knitting” and get back to solely focusing on its marketplace. Buried in a lot of their language is that eBay has gotten distracted, taken its eye off the ball, however you want to call it.
To that end, eBay should spinoff Stubhub, Kijiji (always my favorite acquisition), Marketplaats.nl, Vivanuncios, alaMaula, dba.dk, opusForum, and all other parts of its classified listings business saying they would be worth more outside of eBay than inside.
Next, they go onto say how wasteful and inefficient eBay is, and should have improved margins.
They even made a nifty website where you can read the open letter itself: EnhancingeBay.com.
ANALYSIS:
The entire letter is worth a read. It’s well-written, thoughtful, and coherent.
This is probably a great idea for eBay’s Board to seriously consider. eBay’s history of acquiring related businesses and accelerating them are not good. Many of eBay’s acquisitions were made in an earlier time where folks like Meg Whitman, and others, touted things like the “Power of 3” to describe how eBay, Paypal and Skype would spin the world into a frenzy of greatness. If you notice, eBay owns none of these properties any longer either.
Wharton did a comprehensive study of divestitures and other plans undertaken by activist investors in the past. Here’s what they had to say:
We found that activist-impelled divestitures — the divestitures that activists were demanding that companies undertake — pretty substantially outperformed the ones that managers undertake of their own accord.
Sounds like a pretty good record to me. I see this investor getting a Board seat soon, or barring that, a sharp change in eBay approach in order to unlock the value that they weren’t interested in unlocking until these investors came along.
