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Ahead of Earnings, eBay is Dealing with Activist Investor Elliott Management - YouTube
Channel: The Motley Fool
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Chris Hill: eBay is going to report
their fourth quarter earnings next week.
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But yesterday, shares of eBay were up 6% on,
well, activist investors looking to make some changes.
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And it's not just one, it's two.
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Yesterday, the catalyst was
Elliott Management coming out with this letter.
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Elliott Management owns about 4% of eBay.
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They came out with this letter saying,
"Hey, we'd like to see some changes.
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Specifically, here are the changes we'd like
to see." We'll get to those in a second.
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Starboard Value, probably a better-known name
than Elliott Management -- Starboard Value
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also has a stake, they revealed that recently
-- they're going to come out with their own
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letter at some point soon.
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Pretty interesting timing, planting this flag
a week before eBay reports earnings,
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and putting the CEO on notice.
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But I'm curious what you thought specifically
of the headline changes that Elliott is agitating for --
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spinning off the StubHub business
and the Classifieds business.
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Aaron Bush: I'm not surprised to see this happening.
I think it could make sense to some degree.
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What eBay has done incredibly well over the
past many years is, they've done a good job
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pinpointing and buying businesses
that are relevant and can scale.
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If you think about buying PayPal, buying StubHub,
those turned out to have some pretty fantastic
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returns for eBay shareholders. That's great.
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The problem is that eBay's core
marketplace platform isn't the best business
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to really connect to all of this other stuff.
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It's hard to build a larger encompassing
business that has synergies and is all-inclusive.
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We saw that with PayPal.
It was obvious, PayPal isn't a marketplace.
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We're starting to see that now.
StubHub is a marketplace.
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The Classifieds business is a marketplace.
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But is eBay really the best
connection for those companies to exist?
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I think for the Classifieds
business, maybe it is.
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It's pretty similar to what eBay does,
people buying and selling goods and services.
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It's mainly international,
so there could be something there.
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That doesn't make as much sense to me.
But on the StubHub side, absolutely.
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I can totally see StubHub being a separate
business, and being separate, being able to
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unlock value, make deals
that they couldn't have otherwise.
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Honestly, a company like StubHub could do
well independently, but it wouldn't surprise
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me if it got spun out and then was acquired
by someone like Amazon or Sirius XM, or even
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connected to Spotify in some way to help those
companies build a more complete music experience,
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adding live to just streaming.
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Hill: You and I were talking before we started
taping about the customer experience when
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you're looking to buy tickets,
whether it's to a game or a concert.
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Essentially, once you've made
the decision, "I'm going to go to this thing,"
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then it's all about,
"Where am I going to sit?"
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And that sort of thing.
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By the time you get to buy the tickets, that's
when it clicks in, like, "Oh, my god,
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how much in fees am
I being charged here?"
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But at that point, you're like, "OK, alright,
I'm just going to buy this because I want
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to go to this thing."
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Bush: Yeah, it's not the
friendliest for the consumer.
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Hill: [laughs] No!
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Bush: But it's a pretty
great business to be invested in.
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It tends to generate lots of cash, which can
then be either just delivered straight back
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to investors in dividends or share
repurchases, or used like we see in Live Nation,
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which owns Ticketmaster, they continue to make lots
of new deals that strengthen their ecosystem.
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I could totally see someone wanting StubHub
for that great business and being able to
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use it to strengthen a music ecosystem.
And that's not going to be eBay.
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It makes no sense
why that would be eBay.
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So, I can totally buy why
they'd want to spin out StubHub.
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That would be about a $4 billion business.
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Hill: I think back to a few weeks ago, when
we were here in the studio, we were doing
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Motley Fool Money, first episode of 2019,
sort of our preview of the year.
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One of the things we talked about was CEOs
to watch, whether they are on the hot seat
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or just set up for an interesting year.
None of us mentioned Devin Wenig, the CEO at eBay.
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But I think the next couple of weeks
are going to be really interesting for him.
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He took over as CEO of eBay back in
July of 2015 when the PayPal spin-off occurred.
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You think back to then,
shares of eBay were around $26 a share.
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Today, they're around $33.
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And that alone isn't enough to necessarily
get a CEO fired, but I think the combination
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of the attention being paid because of the
activist investors coming in, being very specific
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about unlocking value, I really think this
conference call next week is going to be interesting.
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Among other things,
they're coming out of the holiday quarter.
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And I saw a lot of eBay
commercials on television.
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And personally, as a longtime shareholder
of eBay, I'm curious to see, not just what
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they put up in terms of revenue and profits,
but what was their marketing spend?
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What did that look like?
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It wouldn't surprise me at all if they came
out next week and it was, "Oh, yeah, we ended
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up shooting for the moon in terms of trying
to bring in revenue, and because of that,
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we spent a ton more on
advertising than we normally do."
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Bush: Right. I think it'll be interesting to see how
open-minded he is to changes being made.
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If he is stubborn... the previous CEO was
also stubborn when it came to spinning off PayPal,
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and that didn't exactly work out.
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I think what he should do is be open-minded
and recognize that some of these businesses
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could have value elsewhere. His legacy could
come from how great of a dealmaker he is.
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Even if you think about, you spin out StubHub,
maybe you spin off the Classifieds, that leaves
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a much smaller eBay.
And what do you do with that?
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Does that become acquired?
Do you make other partnerships with that?
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I think that if the snowball
starts rolling, it'll start accelerating.
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Maybe nothing happens, but if something even
small happens, it could trigger other things afterwards.
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Those are legacy-making
decisions on his part.
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