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Elliott Management Urges eBay to Restructure

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Elliott reveals eBay stake

On January 22, Elliott Management revealed a $1.4 billion stake in eBay (EBAY) stock, representing more than 4% of the company. Elliott Management, headed by billionaire investor Paul Singer, is the largest activist hedge fund. The fund is known for launching activism campaigns to get management to agree to its demands. These campaigns usually lead to value creation for shareholders. Diversified miner BHP Billiton (BHP) plans to exit its US shale business mainly due to Elliott’s demands.

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Elliott urges eBay to restructure

Elliott also wrote a letter to eBay in which it urged the company to restructure its business. Elliott noted that “despite its platform value and asset base,” eBay “has underperformed its peers and the market for a prolonged period of time.” Elliott lists Netflix (NFLX), Booking Holdings (BKNG), and Expedia (EXPE) as eBay’s three closest Internet peers in terms of revenues. These companies have grown faster than eBay despite spending roughly half in comparison to eBay on stock-based compensation. Moreover, other online retail players seem to be winning the growth race. In the third quarter of 2018, Amazon’s (AMZN), Shopify’s (SHOP), Alibaba’s (BABA), Etsy’s (ETSY), and eBay’s (EBAY) revenues grew by 29%, 58%, 54%, 41%, and 6.0% YoY, respectively.

Enhancing eBay’s value

Elliott also stated that after the restructuring efforts the firm has planned for eBay, “eBay can achieve a value of $55 to $63+ per share by the end of 2020, representing upside of more than 75% to 100% within the next two years.” eBay’s stock was trading 10% higher at the opening today.

To enhance eBay’s value, Elliott outlined a five-step plan, which includes:

  • a comprehensive portfolio review
  • revitalizing its marketplace
  • operational improvements and margin expansion
  • appropriate capital allocation
  • effective leadership and oversight
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