Ecommerce giant eBay has confirmed that it’s carrying out an operational review of its business, a little more than a month after activist eBay investor Elliott Management formally asked the company to consider spinning out two of its units.
As part of the review, which will be led by the company’s management team and board of directors, eBay said it will “target operational excellence” and build on its recently announced restructuring. This includes bringing its various global marketplaces under the same leadership.
More specifically, eBay confirmed that it will kickstart a strategic review of its various assets — including, but not limited to — its ticket marketplace StubHub and the eBay Classifieds Group. However, eBay is quick to stress that this is just a review; there’s no guarantee that it will result in the company selling or spinning out either of these units. eBay said it will report its findings later this fall.
“Over the course of the last two months, we’ve met with a number of shareholders to understand their views,” eBay president and CEO Devin Wenig stated. “The bottom line is that we all share common ground. We see tremendous opportunity ahead and want to see eBay’s full potential realized over the long-term. The initiatives we are announcing today are the result of this constructive dialogue.”
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While eBay has a track record of attracting vocal activist investors — most notably a few years back when Carl Icahn fought for eBay and PayPal to go their separate ways — the latest pursuit came to light in late January when hedge fund Elliott Management, which owns around 4 percent of eBay, published an open letter explaining how it felt eBay was underperforming on its potential.
Ultimately, the purpose of offloading StubHub and classifieds would be to allow eBay to get back to basics and focus on being a peer-to-peer marketplace for selling everything and anything.
“Despite its platform value and asset base, however, eBay as a public company investment has underperformed its peers and the market for a prolonged period of time,” explained Elliott Management partner Jesse Cohn in the letter. “This underperformance has been disappointing for both shareholders as well as eBay’s employees, who rely on share-based compensation as a meaningful component of their remuneration.”
Split
Elliott Management has been pushing for eBay to split into three distinct parts. The core eBay marketplace would be one entity, while its ticket marketplace StubHub — which eBay bought for $310 million more than a decade ago — would be another. The third spinoff would be eBay’s classifieds unit, which has so far operated under a loose array of brands around the world, such as Gumtree in the U.K., and Kijiji across hundreds of cities in Canada, Italy, Hong Kong, and Taiwan.
Ahead of today’s announcement, eBay said it had worked with Elliott Management — among other sizable shareholders, such as Starboard Value — to figure out a way forward. As part of its plan to appease these investors, eBay is doling out two new seats on its board of directors — one for Elliott Management’s Jesse Cohn and another for Marvell Technology’s Matt Murphy. A third new independent director will be added later in 2019.
“Our discussions with Devin [Wenig] and the Board have been positive and productive, and we are pleased to have worked collaboratively to reach this agreement,” Cohn said. “We are confident that the initiatives announced today will drive meaningful shareholder value.”
In January, Cohn posited that StubHub could be a $4.5 billion business in its own right, while eBay Classifieds could be worth up to $12 billion — both significantly more than their value under eBay’s umbrella.
“StubHub is non-core to the eBay Marketplace but would command significant value as a market-leading, scale business,” Cohn said at the time.
“Given its attractive financial profile and strategic positioning, we are confident that eBay Classifieds Group can realize significant value through several alternative transaction structures, including a sale or a spin,” Cohn added.
