Will there be another eBay breakup in 2019?

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We all know only too well the fall out that comes from shareholder activists – the last time they got involved with eBay it resulted in the eBay breakup with PayPal and the ramifications of that are still going with eBay starting to roll out eBay Managed Payments in the US.

Now, Elliott Associates, who own shares in eBay worth about $1.4 billion in market value (representing 4% of eBay making them one of the company’s largest investors), is unhappy with the way that the company is managed. Elliot have written to members of the eBay expressing their disappointment in eBay’s performance and suggesting carving up the company in a second eBay breakup, selling business units off and stripping out layers of management.

With sellers still wondering what the eventual shape of payments on eBay will look like when they roll out perhaps the last thing they need is more uncertainty from another eBay breakup. It’s not outside the realms of possibility that the eBay marketplace itself could be acquired if the company is spilt into enough bite size chunks.

Elliott say that there is a uniquely compelling value opportunity at eBay and that they have enormous amount of respect for eBay as an organization, for its history, and for the community that comes to work, sell and shop on eBay each day. They just don’t think that the eBay management are as focused on building eBay for the future as they could be.

The plan involves everything from selling off Stubhub and eBay’s Classified businesses to consolidating offices and cutting out costs. Elliott Associates say that ‘eBay suffers from a deeply depressed valuation due to its history of misexecution’ and that eBay can unlock substantial value today by refocusing on its core business.

So the plan is to strip out all the business units that aren’t material to the main eBay marketplace, strip out management, staff and offices to cut what Elliott Associates consider to be a bloated organisation to streamline costs and put directors and staff in place who are laser focused on the marketplace, revitalise it for once and for all and get it growing much much faster.

In reality this is a damning indictment on eBay CEO Devin Wenig’s management of the business. Devin has been in place as president of eBay’s Global eBay Marketplaces Business Unit since 2011 and become CEO in July 2015. Devin always said that the eBay turnaround was a multi-year project which is still ongoing but it would appear that, at least some, investors consider that four years is long enough and the results aren’t coming fast enough.

Devin certainly has a problem with eBay and it’s not an easy one to solve. eBay know that compressing listings with eBay Catalogue and the new product based shopping experience is attractive to new eBay buyers. That indicates the direction that eBay needs to go if they’re to pick up fresh buyers and get them hooked on eBay. The trouble is that existing buyers and sellers almost universally hate the product based shopping experience and rolling it out too quickly will alienate eBay’s existing base – it’s a lose lose situation.

The letter from Elliott Associates will put massive pressure on eBay as their fourth quarter results are due to be presented to investors on the 29th of January in a week’s time. If their fourth quarter was anything less than stunningly better than investors predict then it could be just the trigger needed to start another eBay breakup.

Elliott Associates 5 point plan for eBay

I. A Comprehensive Portfolio Review

StubHub and eBay’s portfolio of Classifieds properties represent high-value, strategic assets that are worth meaningfully more than the value currently being ascribed to them as part of eBay. In addition to unlocking substantial value, separating these assets would allow eBay’s management team to refocus its efforts solely on the core Marketplace business.

II. Revitalizing Marketplace

eBay’s Marketplace is a strategically valuable asset that has weathered prolonged, self-inflicted misexecution. Management should turn its singular attention to growing and strengthening Marketplace.

III. Operational Improvements and Margin Expansion

Today eBay suffers from an inefficient organizational structure, wasteful spend and a misallocation of resources. By increasing operational efficiency, eBay can free up capital to invest in capability- and revenue-enhancing activities.

IV. Appropriate Capital Allocation

eBay is a mature and highly profitable business that should continue to return substantial capital to shareholders, especially given the significant earnings growth contemplated under the Plan.

V. Effective Leadership and Oversight

eBay must ensure that it has the right, most experienced talent in place to oversee the portfolio review and operational improvements. Management buy-in and Board oversight of the Plan will be paramount to its success.

eBay response to Elliott Associates

“The eBay Board and leadership team regularly engage with our shareholders and value their input. We are focused on delivering value for our shareholders, customers and employees by driving the best choice, the most relevance and the most powerful selling platform to deliver growth. Accordingly, we appreciate Elliott’s recognition of the strength and power of eBay’s business and will carefully review and evaluate Elliott’s proposals. We look forward to the opportunity to engage with Elliott, as we do with all shareholders.”
– eBay Inc

12 Responses

  1. Glad to see others are now seeing through Wenig’s gobbledeespeak jargon filled empty rhetoric.

    The problem here is that Ebay as an entity could be broken up.

    That spells bad news for sellers and ultimately for buyers, too.

    If you split the Ebay marketplace, you will lose buyers, many of whom don’t even know what it is they looking for when they are browsing.

    This is the ultimate reason for the failure of the catalogue.

    Yes, it enables buyers to quickly find obvious items which are widely available.

    But the essence of Ebay is that you can find things there that you won’t find anywhere else.

    Rather than being a pale imitation of Amazon, Wenig should have understood the uniqueness of Ebay’s offer to the buyer. Sure, he’s parroted trite phrases claiming he does, but his actions speak otherwise.

    Wenig’s focus is now divided between Ebay and his role on the board of GM.

    It should be unacceptable to buyers, sellers and indeed shareholders, for the person in charge of Ebay not to be 100% devoted to its future.

  2. As a buyer I find it very hard to find what I want at the price I want.
    Using a “cheapest” search often brings up hundreds or thousands of things I don’t want. This just makes me buy elsewhere.

    As a seller I have seen my income drop by 90% mostly due to competition moving in with very low prices.

    So I get less money which means I spend less on ebay, this causes a downward spiral for everyone.

    Then there has been a massive influx of foreign sellers into uk ebay. This money goes out of ebay uk and is never spent on ebay, so the downward spiral deepens.

  3. One part of me thinks “Goodie, Goodie – More changes – just what I need to fill those empty days with no sales”.
    But then, experience shows me that the current site is messed up completely.
    I logged in yesterday to buy some LED light bulbs and a memory card for my new camera. All I found was the normal plague of sellers, claiming UK stock, yet with 2 weeks delivery. Checking feedback on several, I find plenty of complaints of late deliveries, poor customer service, most stuff being shipped from China and Fakes, Fakes, Fakes, Fakes and more Fakes.
    I drove to Tesco and bought there.
    As a long-term committed eBay seller, this breaks my heart.

  4. Yippeeee!!!

    hopefully eBay will pin this information to their customer service department so they will actually know that sales are really plummeting and we are not just making it up.

    They are brainwashed to all things eBay. Cannot wait for my next CS call when they tell me all is rosy in the eBay garden.

    Just a simple return to basics would correct around 80% of the issues surrounding eBay.

    Every time they force things onto sellers the sellers just try to find ways round it. overseas sellers (china) offering next day shipping at silly prices to get the exposure and so on.

    Just let a seller sell at the price he or she needs and charge the postage he or she wants at what price they can afford or arrange. Do not match and compare his metrics with huge multi billion pound companies.
    Make the listing absolutely clear of what is on offer and and let the buyer decide who they would prefer to buy from.
    Then mark the transaction on the fact that the seller uses the shipping paid for not the shipping offered.
    We offer multi shipping methods and they just do not want to pay for the faster stuff yet eBay keep going on about what buyers want.

    Finally if they want to chase Amazon do it fully in other words leave us all alone to run our own businesses like Amazon do.

    The old saying “if it aint broke don’t fix it” springs to mind.

    Go back to list, then sell, or buy eBay. The way it became the big player before they started tinkering and breaking it.

    Buyers and Sellers are not fools.

  5. Totally agree with Andys comments above.
    The biggest obvious problem with ebay to me is it’s never ending ability to see the answer to its problems as heaping more blame and work on sellers. Anyone who runs a business knows that despite the fancy talk, the customer is no more important than the staff and the staff no more important than the customer. Without one you cannot have the other… balance is the key. A business is like a mechanical clock… you have big cogs and little cogs… doesn’t matter which one stops working… it will still bring the rest to a halt!
    Yet ebay seems to view sellers as the blame bin and heaps everything on them. Then decent sellers leave and slag off ebay in the process. Not only that but most sellers who leavee ebay will also have also been ebay buyers…. so it’s a double loss. In the end you are just left with the big companies who dont care about c.s and even if they had 50% positiove feedback they would still do well, and the scammers. Why would a buyer want to come to a place like that?
    I strongly believe that ebay is being held afloat by long term users who kind of just accept that the system if shot to pieces but it is familar and have little wish to spend time learning new ways. New potential buyers see better run alternatives with a better reputation. When I asked my niece and nephew if they used ebay they both replied with the fact that it was ‘so yesterday’ but fine if you wanted to get something from China in a month! Personally i have always regarded many of the Chinese sellers as fakers but hadn’t stopped to think about the time scales.
    Sadly though ebay do nothing about these things. There is no button to press that gives you a reporting option that is valid for many of the issues you find. Even if there was, does anyone really believe that anyone even looks at any reported items? Certainly not my experience! business sellers listed as private, items in china strangely all located in manchester yet dispatched via china post, rip off listings, key word spamming with no relevence, multiple listings avoiding the rule by addinga random few letters at the end of the title filling page after page of search results….
    I can only imagine that these things are starting to filter through to big share holders who have been happy to ignore them while the returns were still good…. but times change.
    We have already started to migrate our business away from ebay after over 10 years. The ship is sinking, very slowly….. but it is sinking.

  6. @BFT

    Your comment is spot on. They pretend to be in the UK, some even sport Union Jacks in their photos,

    I asked 6 people in my office why they use Amazon prime and not Ebay, everybody said in more or less terms, I’m sick of purchasing an item I think is in the UK but then I find out its coming from China. Ebay sort these Chinese sellers out and stop them abusing the system. If they want to ship from China fine…but do not allow them to change item location and then use promotions to sit on top of searches

  7. BFT
    has it right
    we bought an item on ebay 2 weeks ago were still waiting for delivery,
    when we checked, we find its coming from china
    due in a months time,
    you just get the feeling you have been duped and misled its not good business

  8. These investors are probably losing a fortune and probably know something about the 4Q results we do not.
    All I know eBay does not sell like it once did, and is not worth investing the same time and money into.
    I concentrate mainly on niche sites these days where I find I get better results and most importantly margins. Consumer Confidence is down anyway, and the clowns at eBay think charging more and alienating sellers and buyers will somehow improve things, then of course we have that new dumb draconian defects system to come into force, which the select few only will noty have to worry about.
    I have stopped shopping on eBay with all the FAKE items myself so why would I expect others to.
    The platform is in such rapid decline now something needs to give. 11 Years I have been doing this just such a pity it is going like this…


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