eBay Inc. EBAY
eBay is deeply undervalued; separating Classifieds at peer-level ~22x EBITDA multiples and enforcing a more aggressive Marketplace cost and revenue plan would unlock substantial upside versus today's 8.1x multiple.
Thesis
Starboard, owning more than 1% of eBay, argues the company is deeply undervalued after a year of inadequate progress since its March 2019 cooperation agreement. While management completed the StubHub sale to viagogo for $4.05bn at 20x+ EBITDA, it has not committed to separating Classifieds and has proposed only a 2% three-year Marketplace margin expansion, implying under $250m of cost savings on a $5bn+ base. Starboard demands a public commitment to separate Classifieds — where peers such as Adevinta, REA Group, Rightmove and Auto Trader trade at a ~22x median EBITDA multiple versus eBay's consolidated 8.1x — plus a more stringent cost review of core Marketplace and better revenue execution through Managed Payments and advertising. Shares have fallen 9% since the agreements while the S&P 500 rose 19%; Starboard again requests a board meeting ahead of upcoming governance deadlines.
SCQA
eBay is a pioneering e-commerce marketplace (~$8.6bn 2019 Marketplace revenue) that Starboard first engaged in 2018 and then partnered on via a March 2019 cooperation agreement with Elliott, adding directors and launching an Operating Review and a Strategic Review of StubHub and Classifieds.
Nearly twelve months later progress is inadequate: shares have dropped 9% vs. the S&P 500's 19% gain, the Operating Review promises only 2% margin expansion over three years on a ~28% base, and no commitment to separating Classifieds has been made.
Publicly commit to separating Classifieds through a tax-free spin-off or sale, adopt a more stringent Marketplace cost-cutting plan, execute on Managed Payments and advertising growth initiatives, and immediately meet with the Board ahead of governance deadlines.
Classifieds peers trade at a ~22x 2020E EBITDA median versus eBay's consolidated 8.1x, while the implied ~5.0x RemainCo multiple sits below department stores (5.2x) and well below e-commerce peers (16.3x) — implying multi-turn re-rating upside.
The three reasons
- 1
Classifieds peers trade at ~22x 2020E EBITDA vs. eBay's consolidated 8.1x — separation unlocks value
- 2
Shares fell ~9% since the March 2019 cooperation agreement while the S&P 500 rose 19%
- 3
Operating Review's 2% margin-expansion target implies <5% cost cuts — too modest for eight months of work
Primary demands
- Publicly commit to separating the eBay Classifieds Group via spin-off or sale
- Adopt a more stringent cost-cutting plan for the core Marketplace business beyond the 2% / 3-year target
- Improve Marketplace revenue execution via Managed Payments, advertising, and refocus on core 'treasure-hunter' buyers
- Complete the pending board refresh (add a new director and announce the departure of an incumbent per the March 2019 agreement)
- Grant Starboard a meeting with members of the Board ahead of upcoming governance deadlines
KPIs cited
Pattern membership
Where this document fits across the library's 12 rhetorical / structural patterns.
Precedents cited
- eBay's prior PayPal spin-off (2015) as value-creating portfolio action
- StubHub sale to viagogo for $4.05bn at >20x 2019E EBITDA (November 2019) as first step in simplification
Notable slides (4)
Notes
Six-page public letter from Peter A. Feld (Managing Member, Starboard Value LP) addressed to Chairman Thomas Tierney and Interim CEO Scott Schenkel, cc'd to the Board of Directors. Follow-up to the March 2019 Starboard/Elliott/eBay cooperation agreement. Stake disclosed only as 'more than 1%' — recorded as 1.0 (the explicitly-claimed floor). Tone is collaborative on the surface ('we have tremendous respect for eBay... open to working together') but firm about unmet commitments; critique is institutional rather than targeting a named villain. Document quotes prior management commitments ('target operational excellence...', '[we] anticipate having an update... by the middle of this year') to expose delay. Four charts (TSR table, Classifieds peer multiples, cost-savings waterfall, RemainCo vs. dept-store vs. e-commerce) carry the visual argument; otherwise Word-letter style.