eBay stock rises after Elliott Investments buys $1.4 billion stake

eBay shares are up after Elliot Investments proposes changes for the e-commerce site.

eBay Source: Bloomberg

eBay stock is up after hedge fund Elliot investment bought a 4% stake in the company. In a letter to its board of directors, Elliott insisted that the online auction site should sell some of its business interests.

Why is eBay stock up?

eBay shares have risen after Elliott announced that it would invest in the e-commerce website. Elliott is headed by billionaire activist investor, Paul Singer. Elliott has already made sweeping suggestions for the company to improve its profits after they fell by 13% in 2018. Investors must feel confident that Elliott’s plans for eBay will turn the company around.

‘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,’ wrote Elliott.

‘Will eBay keep StubHub?

Elliott suggested that eBay should sell its interest in StubHub, the ticket resale website. The hedge fund noted that the online ticket site is valued at $3.5 billion, as opposed to eBay’s more profitable classifieds section. The classified group is worth from $8 to $12 billion. In its letter, Elliott noted that eBay’s marketplace business is ‘deeply undervalued,’ and the firm suggested selling off those divisions.

DA Davidson analyst, Tom Forte, is skeptical that the online auction site can revive its profits through selling StubHub and focusing on ads.

'I understand the logic of what the shareholders propose, though I am more optimistic than they appear to be about eBay’s ability to reignite growth on core eBay via advertising and payments,’ said Forte.

Though Elliott thinks eBay has been mismanaged, the letter expressed optimism that eBay can increase its profits again.

‘Elliott believes that eBay is worth far more. But change is urgently needed to address both public perceptions and real business issues. While we believe that execution missteps and unclear focus have impaired value, eBay is far from broken, and its future should be bright,’ noted the firm.

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