Ebay shares jump after Elliott reveals stake and calls for shake-up
Activist hedge fund urges online retailer to sell assets including StubHub and Classifieds portfolio
Elliott Management disclosed a 4 per cent stake in eBay Inc and called for a shake-up of the company’s portfolio that could see its shares being worth as much as double their price today.
Shares in eBay jumped 11.6 per cent in pre-market trading on the news.
Paul Singer’s activist hedge fund is urging the online retailer to review its portfolio and shed some of its assets including StubHub and its Classifieds portfolio in order to focus on its core Marketplace business, and to “ensure that it has the right, most experienced talent in place to oversee the portfolio review and operational improvements.”
“Today eBay suffers from an inefficient organisational structure, wasteful spend and a misallocation of resources,” the hedge fund said. “By increasing operational efficiency, eBay can free up capital to invest in capability- and revenue-enhancing activities.”
Shares, which closed at $31 on Friday, could be worth $55 to $63 by the end of next year, the hedge fund said in a letter to the San Jose, California-based company’s board on Tuesday morning.
“In addition to eBay’s share price underperformance, the rapid deterioration in its valuation reflects a profound loss of confidence by investors,” Elliott partner Jesse Cohn said in the letter.
“EBay is at a critical moment, embarking on several major platform initiatives while grappling with inconsistent execution, a loss of investor confidence and a rapidly evolving e-commerce landscape,” the letter said.
“We firmly believe that now is the time to undertake the necessary actions” in the hedge fund’s plan “and to establish the right foundation for a streamlined eBay to be successful in these efforts.”
Elliott’s stake is worth about $1.4bn.