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eBay company statement responds to Letter from Starboard Value

By Chris Dawson February 5, 2020 - 1:41 pm

eBay have published a response to the Letter from Starboard Value setting out their position and why they think they have everything in hand. Addressing the overall letter they said:

“The eBay Board of Directors includes a director jointly nominated and agreed upon with Starboard, a representative of one of our largest shareholders, Elliott Management, and other strong, experienced and independent directors. The Board and eBay’s management team are aligned in their commitment to taking all appropriate steps to drive the value of the Company. Our Board and management team have implemented changes based on investor input and have taken significant actions to deliver long-term shareholder value and strengthen the business. Through that lens, we will review Starboard’s letter and perspectives as we continue to rigorously review our business and opportunities for growth and value creation.”
– eBay company statement

eBay justify 2019 performance in creating investor value

eBay went on to lay out their achievements from 2019 with the following bullets:

  • Delivering on our financial commitments

    Results were at the high end or better than our January 2019 full year guidance – including growth of Organic FX-Neutral revenues, non-GAAP EPS, and Free Cash Flow

    Tamebay Take: eBay did deliver on financial forecasts, but with flat or contracting growth, hitting very modest forecasts isn’t making investors and Starboard Value desperately happy in the short term
  • Scaling growth initiatives

    Accelerated our Managed Payments transformation in the US and Germany while tracking towards $2 billion of revenue and $500 million of operating income in 2022 and doubled Promoted listings Advertising revenue in 2019 to nearly $400 million

    Tamebay Take: This leans towards eBay’s goal of expanding margins – eBay Payments may save some sellers compared to PayPal fees but doubling the take rate from promoted listings is, with flat GMV growth, squeezing sellers for higher fees for the same amount of sales. It might be good for investors, but is it good for sellers?
  • Delivering better margins

    Delivered 2 points of margin improvement in 2019 enabling 1 point of reinvestment in Payments and Advertising; announced 2 points of additional operating margin by 2022, taking total operating margin rate to at least 30%

    Tamebay Take: We keep hearing about eBay margins, but where is the long awaited acceleration of sales for eBay worldwide? If eBay were growing GMV at around 20% year on year I don’t think we’d be seeing the same investor unrest.
  • Returning significant capital to shareholders

    Implemented our first ever dividend while repurchasing $5.0 billion of common stock in 2019, bringing the total shares repurchased since July 2015 to 35%, returning over 150% of Free Cash Flow

    Tamebay Take: This might appease some shareholders, but the whole thrust of investor unrest is that eBay aren’t returning capital at a rate that they would like to see.
  • Executing on portfolio transformation

    Performed a strategic business review resulting in an agreement to sell StubHub to viagogo for over $4 billion in cash and are on track to share an update on Classifieds mid-year 2020

    Tamebay Take: Starboard Value assert that eBay are dragging their heels on a potential sale of Classifieds and they want to see a sale now, not an update in six months time. Investors will likely wait for StubHub to complete and be happy so long as regulators allow the sale to proceed.
  • Refreshing Board with investor perspectives

    Added two new independent directors within the past year to our experienced, focused and deeply engaged Board, including a director jointly nominated and agreed upon with Starboard and a representative of one of our largest shareholders, Elliott Management. Since 2016, five new independent directors have joined the Board, adding complementary and relevant skillsets, leadership and diversity, and the Board continues to be led by an independent chair.

    Tamebay Take: Getting a seat on the board is one thing, but if eBay still aren’t executing with growth and drag their feet over asset sales this isn’t going to keep investors happy. Additionally, whilst eBay might attempt to mollify Starboard and Elliott with board seats, others are viewing a sale of Classifieds as a big ask to find a suitable buyer with perhaps $10 billion to invest.

eBay open to enhancing value for shareholders

eBay close their statement saying they believe the above actions will position eBay for growth but that they are still open to alternative actions to enhance value for shareholders:

“While eBay’s Board and leadership team are confident that the above actions will help us achieve our previously-stated priorities for 2020 and position eBay for sustainable, profitable long-term growth, we remain open to all value-enhancing opportunities.
– eBay company statement

  • Andy R
    2 weeks ago

    Look, it’s an open secret that the current Ebay board does not know how to grow the business and is focussing instead on squeezing as much juice out before it runs dry.

    For sellers, having Ebay bought out by somebody who understands how to make the platform grow again would be the best solution.

    Having taken out Amazon prime a few years ago, I will only reluctantly buy from Ebay if I can’t find it elsewhere.

    I still reluctantly sell on Ebay but I rarely buy there any more. It costs more to sell and there are fewer eyeballs to sell to. Not to mention the legacy site problems that probably would require a reset with a completely fresh system.

    Yes, I pay a sub on Amazon, but I get things 90% of the time next day. Any occasional lapse is when couriers bungle it a t the depot.

    The Wenig years were the wasted years of going round in circles and meaningless market statements.

    Ebay is failing, not just because of the site gremlins, poor board decisions and exploitation of sellers, it is failing because it is becoming less and less relevant to buyers.

  • 2 weeks ago

    They don’t have to do that much to make massive improvements.

    Chinese fake location abuse wipes £££s of ebay sales by undercutting those genuine listings that are where they say they are. If ebay solve that problem, their profits go up.

    Next day delivery isn’t a must for everyone all the time, but when it is, how do you get it on ebay? No search filter means clicking on multiple listings to check the delivery options, giving up, then heading off to Amazon which might cost more, but there’ll be someone who has what you want on a next day delivery. Stick a search filter on and ebay could compete properly with Amazon.

    Doing these things would cost ebay so little, yet greatly benefit buyers, sellers, ebay and their shareholders alike.

  • John
    2 weeks ago

    Ebay’s Primary problem is lack of willing sellers to sell goods on the platform. Amazon is only good for new retail items, except books. Ebay was a plaform of both new and used items. The issue we’re seeing now is the lack of sellers protections and prohibiting a seller from setting the terms they do business. When a buyer holds all the cards on a transaction, when to issue a return etc. The seller has no choice but to give them a return whether legitimate damage or buyer’s remorse. Which has a significant affect on the bottom line, especially low volume sellers. Ebay has removed restocking fees, and focused on mandatory returns. When shipping is considered, this is just unfair. A mention about about the lack of express shipping on ebay is intentional. I as a seller don’t offer anything but the cheapest ground shipping. When the ebay money back guarantee offers a buyer item price plus shipping back, why would you offer to take it in the teeth for express shipping when they issue a return, or a false item no as described? Also the reason I will no sell internationally on ebay as well. The whole consequence of this is that less and less sellers are willing to stick their neck out there to sell. Less and less individual home users are going to stick their goods up to be sold when the changes of getting defrauded by irrational buyers is too high. I’m low volume selling legitimate parts, but I return rate is 30% and nothing I can do about it except eat the shipping and now the non-returnable Paypal fees as well.

    Ever heard that the feedback system, the thing that started trust on ebay both ways was removed? Yes! Ebay sellers are no longer allowed to post feedback for buyers, that is only allowed positive. So when you have a bad buyer, you’re not allowed to make that public. Truely disgusting. As a result for me I don’t post feedback at all for my buyers, I just leave that system (broken) totally alone.

    All this at a time when it’s virtually easy to setup your own eCommerce store for a low investment. It’s not like 10 years ago when an eCommerce store would cost you 10-20k for an initial setup. For less than 1k you can have a store that takes cards up on something like shopify for little know-how.

    Ebay’s relevance is becoming less and less. I could steer them to profitability, but they’d not listen to me anyways (or all the other sellers about to give up on it). It could have value and function, but its going to take change that I haven’t seen in over 5 years now. Now is the time to change, otherwise it will certainly fail.

    I as a buyer don’t look there much any more because the type of items I like to buy the sellers aren’t willing to take risk to sell. Vicious cycle, less to sell, less to buy.

    With two eCommerce stores of my own now I only use ebay for advertising by listing a few items hoping they aren’t bought on ebay, but instead they find my real store, where I can have fair business policy.

    I hate that Amazon and similar have set unrealistic buying and return policies that place like ebay feel they have to force their sellers to adhere to.

  • Geoff
    2 weeks ago

    I agree with most of the points made by Gav & Andy. I just purchased from eBay, seller based in Leicester is actually in Hong Kong. They show German & UK VAT number but will not issue a VAT receipt. You can guess what happens to the 20% ! There are hundreds possibly thousands of these “sellers”. Take action eBay.

    • Jonah
      2 weeks ago

      Geoff I don’t expect ebay to take any action at all. I agree with the comments on here, but whilst ebay are earning handsomely from such VAT fraud then they are highly unlikely to act.
      Anyway who cares? Ebay is so irrelevant to modern young internet savvy buyers that they will inevitably fall away in time.
      And as for genuine sellers- well the inability to leave truthful feedback, the constant hoops to jump through, the large site fees with postal gauging and the complete lack of seller protection also point to an inevitable demise.

  • Toby
    2 weeks ago

    A business that is seeing its core long term sellers leave. A reputation for scams and dodgy Chinese sellers. A feedback system that is quite literally a joke and i doubt anyone actually pays it any attention any more. A complaints system that basically is a yes / no automated response…. yes for buyers, no for sellers. A fee structure that sees sellers having to increase prices to pay for the fees that are constantly upped to replace the leaving sellers….. I could go on… and on, but somehow ebay are totally blind to this.
    It is now so bad that is will cost them money in the short term to put it right in the long term… and we all know ebay don’t think long term.
    Sad… another household name slowly dying because of the dinosaurs that run it.
    Nothing more i can say that we don’t already know already.

  • 2 weeks ago

    How to fix eBay
    1 clamp down on the fake Chinese knockoffs – they’re illegal and dangerous!
    2 accurate item locations inc the business address for returns
    3 easier for buyers to see and filter delivery – I offer special and 1st class delivery but 2nd as standard and people rarely find how to upgrade postage
    4 clamp down on scammers
    5 get rid of the bugs before updating stuff and never update during busy times
    6 stop ads taking buyers away from eBay
    7 bigger incentives for top sellers who give good service
    8 generally lower fees or invest more in ads to get the traffic to justify the current fees – with Facebook marketplace, sellers will often sell locally

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