Breaking Up eBay: How One Activist Investor's Plan Could Work

Activist investor Elliott Management submitted a proposal for splitting up eBay into three companies, and it struck a chord with many investors. Here's how the plan would work.
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Is it time to break up eBay? 

One activist investor thinks so. Elliott Management, which acquired a 4% stake in the e-commerce marketplace, submitted a lengthy proposal on how to split up the company into three parts. 

In a letter, Elliott proposed spinning out the online ticket seller StubHub into a new company that, by their analysis, would be worth between $3.5 billion and $4.5 billion. Ebay's classifieds group, a collection of localized classifieds sites throughout the world, could be worth between $8 billion and $12 billion, the investor wrote. 

Spinning off the two non-core businesses would allow eBay to re-focus on its main marketplace, which has suffered from execution problems, waste and operational inefficiencies according to Elliott. Laying out a detailed plan to improve the marketplace business, Elliott speculated that by 2020, eBay's stock could rise to $63 per share from its current value of approximately $32 per share. 

In its current state, eBay's marketplace would be worth $15 billion, they wrote. And the marketplace, which is still the second-largest ecommerce site outside of China, could be an attractive acquisition target -- potentially to a company like Alphabet (GOOGL) - Get Report or Walmart (WMT) - Get Report , or a private equity firm. 

"As e-commerce penetration accelerates, it is clear that eBay's unique buyer, seller and geographic breadth make Marketplace a highly attractive acquisition target for both financial and strategic buyers," Elliott Management wrote. 

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