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How Following Elliott’s Proposal Could Reshape eBay

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Pressure from activist investors

Although eBay (EBAY) may have been looking to spend this year focusing its energy and resources on competing with Amazon (AMZN) and others to grow its share of the e-commerce market, little did it know that it would also be dealing with pressure from activist investors. In January, activist hedge fund Elliott Management proposed several changes at eBay, including the spin-off or sale of its StubHub and Classifieds businesses.

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Potential boost to cash position

If eBay follows Elliott’s recommendations, it could boost its cash position. According to Elliott’s estimates, StubHub and Classifieds could fetch up to $16.5 billion for eBay. The company exited last year with $8.6 billion in cash, compared with $32.2 billion at Amazon and $28 billion at Alibaba (BABA). JD.com (JD) and Shopify (SHOP) closed 2018 with $5.8 billion and $2.0 million in cash, respectively.

Potential blow to eBay’s diversification efforts

In light of Elliott’s proposals, eBay is reviewing its options for StubHub and Classifieds. While disposing of these businesses could help eBay raise additional funds to reinvest in driving more growth, the company could end up becoming less diversified as its operations would narrow to mostly running a marketplace. Meanwhile, eBay peers Amazon and Alibaba have been investing big in diversifying their businesses, with ventures in fields such as cloud computing. In the fourth quarter, eBay generated $2.6 billion in revenue and made a profit of $763 million.

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