|Tue Oct 9 2018 15:28:13|
Could eBay Survive a Carl Icahn Sequel?
By: Ina Steiner
Financial news site Bloomberg reported on a rumor
about an activist investor sniffing around eBay, pointing to a report 2 weeks ago from TheDeal.com that apparently cited a single source.
Activist investors can wield tremendous influence, as former eBay CEO John Donahoe learned the hard way. In January 2014, companies controlled by Carl Icahn acquired enough of an economic interest in eBay to pressure it to spin off PayPal
. Readers know who won that fight, even as they continue to deal with the fallout known as eBay managed payments.
Etsy also learned the lesson last year when the activist-investor hedge fund Black-and-White Capital LP called on Etsy to explore a sale.
While Etsy didn't sell itself off, it did replace CEO Chad Dickerson with former eBay executive Josh Silverman. Etsy's board left it to Silverman to make major changes to keep the pressure off - extreme cost-cutting that included layoffs, and outsourcing technology; slashing programs; and greater monetization (including raising fees in July). We took a look back at Silverman's 1-year anniversary in this May article
If an activist investor really is eyeing eBay, its motivations would be to raise the value of its holdings. Would it demand eBay explore a sale? Would it demand eBay spin off StubHub and Classifieds? Would it demand a regime change and cost-cutting measures? (Did the news that eBay actually builds its own servers, unlike Etsy which is now outsourcing its data centers to Google Cloud, catch investors' attention?)
And would an activist investor look for eBay to better monetize its site through fee changes? Are investors concerned about eBay managed payments' initial year-long exclusion of PayPal?
The rumor alone of an activist investor lying in wait could get eBay's board of directors mulling ways to stave off a possible advance.
Whenever an activist investor enters the picture, it's an implicit criticism of the CEO and board - it's saying in effect that it doesn't think management and the company's board are doing enough to maximize the value of shares for investors. Neither John Donahoe nor Chad Dickerson survived the entrance of activist investors during their tenure.
The questions for readers: are eBay and Etsy sellers better off after past moves by activist investors? Could eBay survive a Carl Icahn sequel? Could sellers?