Reviewing its assets
On March 1, eBay (EBAY) announced that it has started reviewing its assets and may sell or spin off its StubHub business unit, the world’s largest ticket marketplace, to focus on its core assets and growth opportunities. The announcement comes after activist investors Elliott Management and Starboard Value pressured eBay to divest StubHub and eBay Classifieds Group.
Pressure from Elliott Management and Starboard
In January, activist investor Elliott Management, which also owns more than 4% of eBay’s stock, pressured the Internet giant to sell some of its none-core businesses and focus on its main Marketplace business to attract online shoppers and better compete with rivals. Starboard Value, another activist investor, made a similar suggestion. It holds a 1% stake in eBay.
According to Elliott, eBay’s Classifieds business and StubHub are high-value strategic assets. Therefore, by selling these two businesses, eBay stock’s value could rise 75%–100% over the next two years. Elliott Management also suggested a five-step restructuring plan to improve operational efficiency, return more capital to shareholders, and boost the company’s value.
By selling high-value business units and focusing on its core platform, eBay could improve its revenue, which, according to Elliott Management, has been not growing in line with that of rivals. Whereas eBay’s revenue grew 6.3% YoY (year-over-year) in last year’s fourth quarter, Amazon’s (AMZN), PayPal’s (PYPL), and Square’s (SQ) revenue grew 19.7% YoY, 18% YoY, and 49% YoY. Facebook’s (FB) and Alphabet’s (GOOGL) revenue grew 30% and 21.5% YoY, respectively, and Alibaba’s (BABA) grew 41% YoY in its fiscal 2019 third quarter (ended in January).