Comparing the eBay Break Up with PayPal and eBay Today

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“Our focus is doing what we want and what shareholders, the other large shareholders, want us to do, which is stay focused on innovating and executing in the market. That’s the best way to drive shareholder value. That’s what I’m doing. That’s what we’re doing”.

Those were the words of John Donahoe in March 2014 when asked about the possibility of an eBay break up and spinning PayPal off due to the activities of activist investor Carl Icahn.

In April that year having temporarily calmed the waters, Donahoe said “We are very pleased to have reached this agreement with Carl, settling proxy issues and enabling our board and management team to focus our full attention on a goal every shareholder agrees on – growing PayPal and eBay, and delivering sustainable shareholder value”.

Icahn responded “I am optimistic that this arrangement with eBay will enhance our ability to discuss large issues affecting the company with greater intelligence and will help to enhance shareholder value”.

We discovered just how much shareholder value was created with the spin off of PayPal which saw Donahoe jumping ship faster than a scalded rabbit to leave with PayPal and likewise Icahn considered he’d raped eBay Inc enough and by November 2015 had sold off all his remaining shares in eBay.

This is when Devin Wenig took command of the eBay mothership and, now with activist investors breathing down his neck, this time around the language is remarkably similar. Rumours have been rumbling since October last year leading to a letter from Elliott associates in January this year. eBay’s response saying “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”, largely mirrored that of Donahoe back in the days of Icahn and PayPal:

Then came the Elliott response to eBay earnings two months of behind the scenes bargaining and negotiations and before we know it eBay has appointed financial advisors, legal council, popped a couple of new Directors onto the board including one from Elliott and Devin Wenig says “The bottom line is that we all share common ground: we see tremendous opportunity ahead and want to see eBay’s full potential realized over the long-term.”

Let’s check out Carl Icahn’s statement from 2014 and compare it to the words of Jesse Cohn, the new eBay Board representative from Elliott:

“I am optimistic that this arrangement with eBay will enhance our ability to discuss large issues affecting the company with greater intelligence and will help to enhance shareholder value”.
– Carl Icahn 2014

“Our discussions with Devin and the Board have been positive and productive, and we are pleased to have worked collaboratively to reach this agreement. We are confident that the initiatives announced today will drive meaningful shareholder value.”
– Jesse Cohn, Elliott, 2019

Both statements talk about shareholder value, that’s all investors are interested in. The first statement was made en route to an eBay break up and spinning off PayPal. The second doubtless again a temporary calming of the waters but most likely a portent for another eBay break up, news of which will probably break in the Autumn. The only question is will it be the eBay marketplace that’s sold or will the marketplace remain with shareholders and just Stubhub and eBay Classifieds be spun off?

9 Responses

  1. I think Goldman will be looking for a buyer. The marketplace is the golden jewel.
    Companies like Elliot want their money and will be wanting to jump ship.
    Customers and merchants are the last thing on Wenig mind he is under pressure as eBay has clearly lost the marketplace battle to Amazon and badly also….new entrants have entered the fray, companies like Etsy have emerged, classified is more Facebook than Gumtree etc…and retailers have got on board with e-commerce.
    Just myself I deal on multiple niche sites now where a few years ago it was just ebay and Amazon, now I hardly bother with any off them as they offer do not offer any value to myself as a merchant (1 way street, and they are to greedy)

    Everyone I know now has a PRIME account (TV was the big draw for that, and the shopping comes with it) so WHY use eBay, what is the attraction of even having an eBay account now.
    Honestly I do not know anyone who shops on eBay anymore.
    It is a great marketplace (or was) but it has become dull, overcomplicated, and badly run over the last couple of of years…again it is full of counterfeit, basically back to the bad old days being used as a fence for crooks etc…

    Ever what happens your going to need someone with big pockets to turn eBay around, offering customers an actual reason to go to eBay.
    Tough sale whatever….and the Global Economy is on a downward trend as the Debt cycle has nearly run it’s course again…

  2. The problem here is that the only stakeholders to have a say in Ebay’s future will be shareholders.

    There’s something wrong when someone with a 4% stake can effectively force actions on Ebay with such wide potential repercussions.

    As I’ve said before, I’m not concerned about Wenig’s future. His leadership has led Ebay to this point, after all. He will also no doubt get a big payoff and move full time to the board of GM.

    More worrying is the prospect of what might happen next? The high street has seen numerous failed companies, bought by venture capitalists who only want to fatten the turkey for Xmas (Thanksgiving if you’re American).

    I gave Ebay another 3 years last year, but this is now happening much much sooner.

    Do sellers really want a board dominated by investors who only after a quick buck and who will be unwilling to look to the long term for the site?

    One bad period of management was survivable, but two in a row now threatens the survival of Ebay as we know it.

    The latest seller release betrays what was long suspected, namely that Ebay management didn’t know what is was doing and is now backtracking.

    Will people be asking in years to come, what was the name of that site, you know, the one that was like Amazon, only not as good?

  3. Walmart buying eBay marketplace (once the StubHub has a buyer) is logical. I mean they’re a 500bn revenue company working in the narrow margin of approx 4-5% they dominate the offline US market, but struggles online. The new CEO is a fresh breath of air. They need to take the fight online to Amazon before Amazon gains more brick and mortar.

    Walmart need stretegic assets online. eBay is a mature market that isn’t going to decline much (good revenue stream in 2020 from payment/ads), with the StubHub /other extras sold – it will be a good share price. Stock market hasn’t liked eBay, so a leaner eBay will be under more pressure, so very vulnerable to PE / takeovers. Amazon doing it would be unlikely. They’ll find eBay too old / bulky /likely to be tied up in merger watchdogs.

  4. get real
    just go over the top , head for the machine guns,
    dont fight it nothing we can do

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