An activist hedge fund invested in 4% of eBay this past January, and immediately began making waves. The $1.4 billion purchase gives Elliott Management a unique opportunity to influence the direction of the international auction site. An open letter to the company details recommendations to “enhance eBay”, and primarily focuses on divesting the ticket reseller StubHub and the Classifieds properties.
eBay’s stock climbed 2.8% in response to the news, and there are apparently a few companies interested in purchasing StubHub.
“We’re making significant progress and actively reviewing the role and value of StubHub and Classifieds in our portfolio. [eBay is] focused on determining the best path forward to create shareholder value.“David Wenig – eBay CEO
It is common for companies that grow too large to lose focus on managing all different revenue streams. However, in such cases it can be beneficial to spin off branches as independent businesses, which can begin to thrive again under a more focused leadership. The analysts at Elliott Management certainly believe eBay can do better focusing on what it is best at, and selling StubHub can generate a hefty income. Another avenue would be to keep StubHub and devote significantly more resources to managing it.
eBay purchased StubHub in 2007 for $310 million; conversely in 2018 gross revenue alone was $318 million. The ticket reselling website operates under the same premise as eBay. Ticket holders can put tickets up for sale on the marketplace, for anything from baseball games to music festivals. Despite many complicated laws between states and countries regarding scalping practices, StubHub is currently growing. If eBay makes the choice to sell, we can be certain it will be a short time before the “Sold” sticker gets slapped across the sign.