Citing sources familiar with the matter, CNBC reported that activist hedge fund Elliott Management, which owns more than 4 percent of eBay, made recommendations in a letter Tuesday (January 22) that included selling off StubHub (which eBay acquired for $310 million in 2007) and eBay’s classified advertising properties so the company could focus attention on its online marketplace.
“Elliott believes that eBay is worth far more — but change is urgently needed to address both public perceptions and real business issues,” the activist hedge fund said in prepared remarks. It added that all three businesses could function more efficiently and profitably separately instead of remaining under the single eBay umbrella.
In addition, activist hedge fund Starboard Value LP also has taken a position in eBay and is planning to make similar recommendations in the near future.
While eBay’s stock price has been down 22 percent over the last 12 months, the revelation that Elliott has a stake in the company sent shares up more than 6 percent in late Tuesday (January 22) trading. Elliott also believes that if eBay focuses on its online marketplace, it could see its share prices rise to $63 by 2020.
The eCommerce company currently has a market valuation of more than $31 billion, with eBay’s marketplace making $2.1 billion in the third quarter, StubHub generating $291 million in sales and the classifieds unit earning $254 million. Elliott has estimated that the Classifieds Group could sell for anywhere between $8 billion and $12 billion, while StubHub could attract between $3.5 billion and $4.5 billion. And even without any operational improvements, Elliott projected that eBay’s marketplace could fetch about $15 billion if sold.
In a statement, eBay responded to the Elliott letter by saying the company appreciates “Elliott’s recognition of the strength and power of eBay’s business and will carefully review and evaluate Elliott’s proposals.”