Seth Klarman added eBay
During the fourth quarter, Seth Klarman added 21 million shares of eBay (EBAY) worth $589 million to his portfolio. The stock accounts for a very significant 5.1% of its total portfolio value.
Elliott’s activist stake in eBay
Elliott Management also revealed a ~4% stake in eBay in January 2019. Elliott’s head, Paul Singer, also wrote a letter to eBay in which he 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. Moreover, other online retail players seem to be winning the growth race. In the third quarter of 2018, the revenues of Amazon (AMZN), Shopify (SHOP), Alibaba (BABA), Etsy (ETSY), and eBay (EBAY) rose 29%, 58%, 54%, 41%, and 6.0% YoY, respectively. After the disclosure of Elliott’s stake in eBay, the stock surged.
On January 29, eBay delivered better-than-expected fourth-quarter earnings and revenues. eBay posted adjusted EPS of $0.71 in the fourth quarter, which beat analysts’ expectations of $0.68 per share and the company’s guided range of $0.67–$0.69 per share. The earnings increased by 20.3% YoY due to top-line growth and share buybacks.
eBay’s average price during the fourth quarter was $29.4, implying a gain of 25% for Klarman for his position on the stock, assuming he bought it at the average for the quarter. eBay’s current price is $36.7, which implies a gain of 31% year-to-date, until February 20. Klarman was probably confident that after lagging peers (SPY) (DIA) for a while, eBay stock could turn around, which is proving to be true.