Stocks

What's Next for eBay Stock After CEO Walks

Devin Wenig appears to be a victim of eBay’s battle with activist investors over the direction and structure of the business.

Devin Wenig appears to be a victim of eBay’s battle with activist investors over the direction and structure of the business.

The plot is thickening at eBay.

Wednesday morning, eBay (ticker: EBAY) CEO Devin Wenig stepped down in an apparent dispute with the company’s board related to its ongoing strategic review. Wenig appears to be a victim of eBay’s battle with activist investors over the direction and structure of the business.

The roots of today’s events reach back to a January letter to the eBay board from Elliott Management, in which the activist hedge-fund firm asserted that the stock offered 75% to 100% upside—or $55-$63 a share—with some restructuring of the business. (Then in the low $30s, the stock has moved up to the high $30s.)

The Elliott proposals included the potential sale of the company’s StubHub and Classifieds units, as well as expanded capital return to shareholders, revitalization of the Marketplace business, operational improvements, and “effective leadership and oversight.”

Just a few weeks after Elliott sent the letter, the company responded by kicking off a strategic review of both StubHub and Classifieds, while adding two new independent directors to its board, including Elliot partner Jesse Cohn and Marvell Technology CEO Matt Murphy. The company also entered into standstill agreements with both Elliot (which held about a 4% stake) and Starboard Value (with 1%).

In Wednesday’s announcement, eBay said—not for the first time—that it expects to update investors on the strategic review process this fall. Goldman Sachs is advising the company.

EBay named Chief Financial Officer Scott Schenkel to succeed Wening on an interim basis while the board searches for a permanent replacement. Andy Cring, vice president of global financial planning and analysis, was named interim CFO.

Dancing around the issues that led to Wenig’s departure, eBay said in Wednesday’s announcement that “given a number of considerations, both Devin and the Board believe that a new CEO is best for the company at this time.”

In a tweet, Wenig was a little blunter. “In the past few weeks it became clear that I was not on the same page as my new Board. Whenever that happens, it’s best for everyone to turn that page over,” he wrote.

CNBC reports that Wenig disagreed with the board on what to do with the Classified business, with Wenig preferring to retain it while some board members wanted to sell it.

In the second quarter, eBay posted revenue of $271 million for Classifieds and $243 million for StubHub. JMP Securities analyst Ronald Josey writes in a research note Wednesday that there have been reports that eBay could attract bids of $3 billion to $4.5 billion for StubHub and as much as $12 billion for the more profitable Classifieds business.

But Josey adds that while eBay has been operating more efficiently and delivering on its promise to return capital to holders in the form of dividends and buybacks, the stock is likely to stay “range bound” until gross merchandise value—and management—stabilizes.

Evercore ISI analyst Lee Horowitz argues that not only does Wenig’s exit make the sale of both StubHub and Classifieds more likely, but that ”with Mr. Wenig no longer in the fold, perhaps core eBay grows increasingly attractive to a large retail company who can leverage eBay’s user scale against an established retail brand with a diversity of product offerings.”

Neither eBay nor Wenig immediately responded to requests for comment.

EBay stock is trading down 0.66%, at $39.30.

Write to Eric J. Savitz at eric.savitz@barrons.com

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.