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In: Finance
Why are shareholders wanting Ebay to divest itself of StubHub?Who would want to buy StubHub?
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Expert Solution
Activist hedge fund Elliott Management, which acquired more than 4% interest in eBay in January, and Starboard Value, that holds a 1% stake in eBay urged the company to divest StubHub and the classifieds group. This was because they believed that the assets were undervalued. StubHub is an online ticket exchange company acquired by eBay in 2007.
They claim that tactical changes by eBay could increase its value 75%-100% from its current stock price by 2020. StubHub represent strategic assets of high-value, worth meaningfully more than the value currently being attributed to them as part of eBay. A StubHub spinoff would help eBay make operational improvements to improve its margins and ensure it has the right leadership team in place.It would also ensure a substantial payout to Elliott and Starboard since both firms own a piece of eBay.
As the leading player in a high-value business with competitive barriers to entry, StubHub enjoys an attractive economic model. StubHub competes with New York-based SeatGeek, Razorgator, Ticket Liquidator and Vivid Seats. Who would buy Stub Hub is still a question that needs to be answered.
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