Activist investor Starboard Value LP stepped up pressure on eBay to move faster to separate its eBay Classifieds Group and to cut eBay Marketplaces costs. It also voiced its support for Managed Payments and eBay’s initiative to increase revenue from seller advertising.
Starboard published its letter to eBay’s Chairman of the Board Tom Tierney and interim CEO Scott Schenkel in which it asserted they have not made enough progress since March 2019, when eBay entered into “cooperation agreements” with Starboard and another activist investor, Elliott Management.
“We have been disappointed with the speed and lack of urgency with which the Operating and Strategic Reviews have been conducted since their commencement in March 2019,” wrote Starboard Managing Member Peter Feld.
Starboard also said eBay could improve revenue trends by executing on growth opportunities with its advertising initiative and Managed Payments, and it wrote:
“We also believe eBay should return to its roots in targeting its historical core buyer universe of “self-expressionists and treasure hunters”, who are seeking unique, hard-to-find, or value-oriented items.”
Starboard noted eBay had invested heavily in growth initiatives over the past several years that led to margin contraction in the core Marketplace business. “Unfortunately, despite this significant spend, growth has continued to slow in the Marketplace business, with Marketplace GMV declining 5% in 2019 on a reported basis. We would expect eBay to continue to invest in opportunities for potential growth, but given historical challenges, a more stringent focus on profitability is also needed.”
Starboard said it was pleased that the March 2019 cooperation agreements among Starboard, Elliott Management, and eBay had resulted in the immediate placement of two new directors on eBay’s Board of Directors “as well as the intended appointment of a third new director and the departure of one incumbent director.” However, it went on to say, eBay “has neither added a new director nor announced the departure of an incumbent independent director.”
The intention of Starboard’s letter was made clear when it wrote: “In order to achieve the optimal outcome, we believe Classifieds must be separated, and a more comprehensive and aggressive operating plan must be put in place to drive profitable growth in the core Marketplace business.”
You can find the letter on the StarboardValue.com website.
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Update 2/4/2020: eBay issued a statement in response to Starboard’s letter.