THE CHALLENGES OF EBAY – CORPORATE

It seems apparent that the new board of directors at eBay have differing ideas of what to do with the company than did CEO Devin Wenig, who has announced his departure from that position.

When the company split from PayPal four years ago, eBay was left with the core marketplace business along with the StubHub and Classifieds units.  Marketplace still provides more than 80% of the company’s total revenue (ref. WSJ).  But activist investors Elliott Management is on the case and has said that the three components could fetch greater value apart rather than together – we notice that it’s always about selling the properties with activist investors – no attention seems to be paid to how the running of the companies, once split asunder, will fare in the marketplace.  That’s because the activists aren’t actually managers at all, but, instead, are out to snag as much wealth as they can and as quickly as they can.  And, regrettably, Elliott, along with another activist group, Starboard Value, have recently gained seats on the eBay Board.  CEO Wenig was a known opponent of further separation of the company, so there’s speculation that his ouster now makes that separation more possible.  But there are some things that could prevent the activists’ preferences from coming to fruition  For one,  growth has slowed significantly at all three of the eBay components, with revenue at the marketplace and StubHub expected to rise less than 1% this year (ref WSJ).  Marketplace generates about $7.5 billion a year and continues to be vulnerable to competition from Amazon, whose online retail outlet sells $130 billion annually.  EBay is currently undergoing an “operating review” with an update due out this fall.  And it has also said that it will do a separate “strategic review of its asset portfolio.”  The activists might have had the clout to force out the CEO, but there might be little that they can do to change the revenue circumstances of the company.  But, then, regrettably, that hasn’t tended to deter calls for selling or shutting down other businesses in the past – we all recall the actions and results at Toys-r-Us and Sears, among others, where activists have been involved.

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