November 26, 2019

Breakingviews: Maybe eBay should rebrand as a VC fund

by Breakingviews.

EBay’s night job is looking more profitable than its daytime one. The $29 billion company pioneered online commerce but it’s now just a shadow of $880 billion Yet the sale of StubHub for just over $4 billion shows eBay’s continuing success buying and incubating growing companies.

The divestment of the ticketing outfit is one that shareholder Elliott Management has pushed for, but achieving a price in the range proposed by the activist investor indicates eBay knows what it’s doing. It only paid $310 million for StubHub in 2007, though it’s added to the business with other acquisitions along the way.

Meanwhile, there may be more financial rewards coming if the company, currently led by interim Chief Executive Scott Schenkel, can sell its online classified-advertising unit for the $8 billion to $12 billion Elliott suggested earlier this year it might be worth. EBay has essentially built that business from bits and pieces.

The biggest coup for eBay’s shareholders has been PayPal. The company paid $1.5 billion for the online payments firm in 2002 and later bolted on some additions. In 2015, after pressure from Carl Icahn, another activist, it spun off the business entirely to shareholders. PayPal is now worth $122 billion.

But lower-profile investments have done well in eBay’s hands, too. A 2017 stake in Flipkart was, well flipped, in 2018 for more than a $300 million gain after tax. And eBay said it made a significant profit when it dumped its holding in Latin American e-commerce outfit MercadoLibre for over $1 billion in 2016.

EBay has even turned seeming duds into money-spinners. Consider Skype. EBay paid $3.1 billion to buy the internet-calling firm in 2005 and wrote down nearly half the value a few years later. But it held onto a chunk of Skype when it sold a majority to private-equity funds in 2008, and Microsoft’s eventual purchase of the business for $8.5 billion ended up netting eBay at least a 30% return on its original investment.

With a record like this, maybe eBay should downplay the e-commerce angle and rebrand itself as a venture-capital fund.


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