The activist hedge fund behind the move to take remote deposit capture software provider Mitek Systems Inc. private said Tuesday that it has acquired a 4% stake in eBay Inc. and is advocating for changes to improve the online marketplace’s profitability, including through payments opportunities.
New York City-based Elliott Management Corp. disclosed its $1.4 billion stake in a letter to eBay’s board of directors. Elliott outlined a series of steps it believes could result in San Jose, Calif.-based eBay’s stock rising 75% to 100% over its current price range.
“Despite its remarkable history as one of the world’s largest e-commerce platforms, eBay as a public-company investment has underperformed both its peers and the market for a prolonged period of time,” Elliott said in a news release.
Elliott’s 18-page letter, signed by partner Jesse Cohn, notes that eBay has various growth initiatives under way, including so-called managed payments and development of its Promoted Listings service to help a seller’s items stand out among billions of listings. The managed-payments project comes as eBay and former subsidiary PayPal Holdings Inc. part ways. PayPal had been eBay’s preferred payment platform, but under the new managed-payments system sellers will be paid from buyers directly into their bank accounts. PayPal will be just one more payment option on eBay, and processor Adyen is now serving as eBay’s payment gateway.
The letter says both Promoted Listings and managed payments “represent tremendous upside opportunities,” with payments having the potential to develop into “a multi-billion dollar revenue opportunity with substantial profits. So far, eBay’s execution of these initiatives has been inconsistent from the onset, with issues ranging from a lack of PayPal support for managed payments to the inadequate reporting and analytics functionalities on Promoted Listings.”
Elliott, however, says “fortunately, all of these issues are fixable and through an aggressive emphasis on operational execution and continued enhancements to the platform, eBay will be able to successfully capture these significant and near-term value-creation opportunities.” The letter urges eBay to make a host of changes, including a greater focus on its core Marketplace operation and to consider the possible sale of its StubHub and Classified businesses.
An eBay spokesperson did not respond to a Digital Transactions News request for comment late Tuesday.
A software firm owned by Elliott, ASG Technologies Group Inc., has made an offer to acquire publicly traded Mitek, an offer San Diego-based Mitek has resisted. But Mitek earlier this month said other parties also have expressed interest in the company, and now Mitek says it is considering “strategic alternatives.”