Elliott Management Corp. sent a letter to the board of EBay Inc. outlining steps it says are “urgently needed” to boost the value of the online marketplace.
Elliott, which owns more than 4 percent of EBay, proposed a five-step plan that involves reviewing EBay’s portfolio of companies, including StubHub, revitalizing the company’s Marketplace, which Elliott deems poorly managed, and returning capital to shareholders.
If the recommendations outlined by the activist investor run by billionaire Paul Singer are followed, Elliot sees EBay’s shares valued at $55 to $63 a share, potentially doubling their value from Friday’s close. EBay surged 12 percent in early trading Tuesday to $34.70 after the letter was released.
“Despite its remarkable history as one of the world’s largest e-commerce platforms, EBay as a public-company investment has underperformed both its peers and the market for a prolonged period of time,” Elliott wrote in the letter.
Representatives for San Jose, California-based EBay weren’t immediately available for comment outside of normal business hours.
EBay Chief Executive Officer Devin Wenig has been trying to differentiate the online marketplace, which doesn’t charge membership fees, as a destination where shoppers can find deals and discover new products. Though EBay gave an upbeat profit forecast when it reported earnings in October and revenue was in line with analysts’ estimates, investors have been concerned that the company can’t compete with Amazon.com Inc. and retail rivals moving online such as Walmart Inc.
EBay and Amazon are fierce competitors that rely on independent merchants who sell on their sites. Amazon has more customers, sales and faster growth than EBay, but some sellers prefer the EBay platform since it’s a pure marketplace, meaning EBay doesn’t compete with its own merchants for sales like Seattle-based Amazon.
EBay sued Amazon last year, claiming the online retailer infiltrated Ebay’s internal email system to recruit high-value sellers.
In the letter, Elliott says EBay management should focus on “growing and strengthening Marketplace,” which Elliott says has weathered “prolonged, self-inflicted misexecution.”
EBay has boosted advertising and changed the marketplace-shopping experience in an effort to lure new customers to the site. It tries to differentiate itself from Amazon, which charges yearly or monthly dues for shipping discounts, by emphasizing that EBay has no membership fees to access deals that often include free shipping.
Last June, EBay announced a reorganization that resulted in staff cuts of almost 300 employees. Software engineers and research scientists were among those let go in California. The company had 14,100 employees globally at the end of 2017.
In the letter, Elliott said EBay needs to increase “operational efficiency,” and also recommends EBay accelerate its share repurchase plan to $5 billion this year.