|25 November, 2019

Maybe eBay should rebrand as a VC fund

The biggest coup for eBay’s shareholders has been PayPal

Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., October 22, 2019.

Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., October 22, 2019.

REUTERS/Brendan McDermid

NEW YORK  - EBay’s night job is looking more profitable than its daytime one. The $29 billion company pioneered online commerce but it’s now just a shadow of $880 billion Amazon.com. Yet the sale of StubHub for just over $4 billion shows eBay’s continuing success buying and incubating growing companies.

The divestment of the ticketing outfit is one that shareholder Elliott Management has pushed for, but achieving a price in the range proposed by the activist investor indicates eBay knows what it’s doing. It only paid $310 million for StubHub in 2007, though it’s added to the business with other acquisitions along the way.

Meanwhile, there may be more financial rewards coming if the company, currently led by interim Chief Executive Scott Schenkel, can sell its online classified-advertising unit for the $8 billion to $12 billion Elliott suggested earlier this year it might be worth. EBay has essentially built that business from bits and pieces.

The biggest coup for eBay’s shareholders has been PayPal. The company paid $1.5 billion for the online payments firm in 2002 and later bolted on some additions. In 2015, after pressure from Carl Icahn, another activist, it spun off the business entirely to shareholders. PayPal is now worth $122 billion.

But lower-profile investments have done well in eBay’s hands, too. A 2017 stake in Flipkart was, well flipped, in 2018 for more than a $300 million gain after tax. And eBay said it made a significant profit when it dumped its holding in Latin American e-commerce outfit MercadoLibre for over $1 billion in 2016.

EBay has even turned seeming duds into money-spinners. Consider Skype. EBay paid $3.1 billion to buy the internet-calling firm in 2005 and wrote down nearly half the value a few years later. But it held onto a chunk of Skype when it sold a majority to private-equity funds in 2008, and Microsoft’s eventual purchase of the business for $8.5 billion ended up netting eBay at least a 30% return on its original investment.

With a record like this, maybe eBay should downplay the e-commerce angle and rebrand itself as a venture-capital fund.

CONTEXT NEWS

- EBay said on Nov. 25 it had agreed to sell its ticketing unit, StubHub, to ticket reseller Viagogo for just over $4 billion in cash. StubHub was founded by Eric Baker, who left the company before it was sold to eBay for $310 million in 2007. Baker went on to found Viagogo.

- Online commerce firm eBay has been under pressure from activist investor Elliott Management. In a letter sent to eBay’s board of directors in January, Elliott called for the company to sell or spin off StubHub and eBay’s classified businesses. Elliott estimated StubHub could be worth $3.5 billion to $4.5 billion and classifieds between $8 billion and $12 billion.

(Editing by Richard Beales and Amanda Gomez) ((robert.cyran@thomsonreuters.com; Reuters Messaging: robert.cyran.thomsonreuters.com@reuters.net))

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