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eBay Stock Climbs on Elliott Management’s Letter: Here’s Why

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eBay stock price performance

eBay (EBAY) stock surged on Tuesday and closed 6.13% higher to $32.90 per share after Elliott Management sent a letter to eBay shareholders, stating that the stock of the e-commerce company would rise if the company considered selling some of its none-core businesses. The news came just a week ahead of the company’s fourth-quarter-2018 results, expected on January 29.

eBay’s stock price declined 17.4% on a year-to-date basis as of January 22. In comparison, eBay’s Internet peers Amazon (AMZN) and PayPal (PYPL) gained 20.2% and 7.4%, respectively. Google parent Alphabet (GOOGL) declined 7.9% while Facebook (FB) dropped 20.9%.

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Letter by Elliott Management

Per Elliott Management, eBay should sell its non-core businesses—such as its StubHub ticket business as well as its Classifieds properties portfolio. The investment firm, which owns more than 4% of eBay’s stock, believes the company should solely focus on strengthening its core Marketplace business. “In addition to unlocking substantial value, separating these assets would allow eBay’s management team to refocus its efforts solely on the core Marketplace business,” the firm wrote.

According to Elliott, eBay’s Classifieds business has a potential value of $8 billion to $12 billion, whereas StubHub’s value is between $3.5 billion and $4.5 billion. Therefore, by selling these two businesses, the firm believes eBay stock could reach around $55 to more than $63 per share by the end of 2020, which marks an upside of more than 75% to 100% over the next two years.

Also, the firm wants eBay to improve its operational efficiency and return more capital to stockholders.

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