eBay (NASDAQ:EBAY) announced on Monday that it has entered into a definitive agreement to sell StubHub to Swiss ticket seller viagogo for about $4 billion. This brings StubHub full circle: The ticket reselling platform was co-founded by Eric Baker, who is also founder and CEO of viagogo. The sale is expected to close by the end of the first quarter subject to regulatory approval and customary closing conditions.
Viagogo is a leading worldwide ticket marketplace for live sports, music, and entertainment events, and the deal seems like a natural fit. The combined marketplace will sell hundreds of thousands of tickets in more than 70 countries.
In a press release announcing the deal, Baker said the deal was a dream come true: "It has long been my wish to unite the two companies. I am so proud of how StubHub has grown over the years and excited about the possibilities for our shared future."
This sale is a doubled-edged sword for eBay investors. The deal will appease activist investors and give the company plenty of cash for shareholder returns and to reinvigorate its flagging e-commerce business. Unfortunately, eBay loses one of its fastest growing businesses.
Earlier this year, the company came under the gaze of activist investors, who have been agitating for change. Elliott Management took a stake of $1.4 billion in the company and published an open letter to eBay's board of directors with a laundry list of suggestions to increase shareholder value. At the same time, hedge fund Starboard Value notified eBay that it had acquired a stake of less than 4% and suggested the company spin off some of its noncore assets.
This led to a strategic review by eBay, eventually resulting in the decision to put up both eBay Classifieds and StubHub for sale -- but the decision has not been universally well received. In September, eBay announced that its CEO, Devin Wenig, would step down, reportedly over the decision by the board to give in to the activist investors and sell eBay's Classifieds business.
If this seems a little like deja vu, it bears striking similarities to eBay's decision to split off PayPal (NASDAQ:PYPL). Back in 2014, when eBay first announced its decision, it said soon after that then-CEO John Donahoe would step down. Donahoe had steadfastly maintained that spinning off PayPal "made no sense." Since the divestiture in mid-2015, PayPal has soared more than 170%, while eBay stock has been treading water, gaining just 28% -- far below the 47% gains of the S&P 500.
A history of questionable decisions
This isn't the first time eBay has sold off quickly growing assets to make a fast buck, when exercising delayed gratification would have been a better course of action. In October 2016, it sold off its 18% stake in fast-growing Latin American e-commerce and payments platform MercadoLibre (NASDAQ:MELI) for about $1.37 billion. I believed the move was a mistake and noted shortly thereafter, "There's nothing wrong with holding on to your winners and letting them run."
Looking back, the move cost eBay dearly. MercadoLibre has continued its rapid growth. Its current share price would net eBay more than $4.6 billion -- meaning eBay left more than $3.3 billion on the table -- and gave up one of its fastest growing businesses. Sound familiar?
That leaves just eBay Classifieds, and the tech giant will have sold off every remaining growth asset -- and that's on the chopping block as well. eBay's e-commerce platform is stagnating, as its marketplace revenue declined 1% in the third quarter, or up 1% excluding the impact of currency exchange rates. At the same time, its gross merchandise volume -- the dollar amount of the products sold on its platform -- declined 5% year over year, or 2% in constant currency.
With anemic e-commerce growth and its growth-producing assets dwindling, eBay looks more and more like a dumpster fire than a worthwhile investment.