Hedge funds Elliott Management and Starboard Value have taken stakes in ebay Inc. and urged changes at the e-commerce platform including the sale of some of its businesses, which could release billions of dollars in capital.
In a letter sent to the company’s board, Elliott asked eBay to hive off ticket-sales franchise StubHub and eBay Classifieds Group from its core marketplace as part of a five-point plan to double the company’s value.
Separately, a source familiar with the matter told Reuters that Starboard had also taken a significant stake in the platform and was pushing for changes including asset sales.
Shares of eBay, which lost a quarter of their value last year as it lost market share to Amazon.com Inc. and other online competitors, rose as much as 12.1 per cent to US$34.75 in response and were on course for their best performance in a year.
Elliott, which owns a stake of more than 4 per cent in eBay, said the company could raise its value to $55-$63 a share by 2020 if it implemented the restructuring plan.
EBay said it would review Elliott’s proposal, and is looking forward to engaging with the hedge fund.
Starboard did not respond to a request for comment.
The San Jose, Calif.-based company has been splurging on product development, brand marketing and website design, while also cutting jobs.
Elliott said StubHub on its own could be worth $3.5 billion to $4.5 billion and eBay Classifieds, which could be sold or spun off, between US$8-billion and US$12-billion.
The shareholder also detailed a plan for operational improvement, including a roughly US$250-million increase in operating expenses from 2018 to 2021.
“While we believe that execution missteps and unclear focus have impaired value, eBay is far from broken, and its future should be bright,” Elliott’s Jesse Cohn wrote, adding that his mother had built a successful business on eBay by selling jewellery for over a decade.
DA Davidson analyst Tom Forte said he agreed that restructuring could create more value for shareholders.
Elliott said its plan earmarked 20 per cent of free cash flow on an ongoing basis, or US$600-million to US$700-million, for annual investment in acquisitions of companies or technologies.
It called for an initial meeting with the board to discuss its concerns and for the establishment of a strategy and operations committee to execute the improvement plan.
“[EBay] has been primed to see activist intervention for some time now,” Benchmark Co analyst Daniel Kurnos said.
“The general consensus is that a true cleanup is needed.”