eBay is due to report earnings amid a C-suite shuffle

Did activist investors force the CEO's departure?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The drama continues at eBay (NASDAQ: EBAY). Late last month, the company's CEO, Devin Wenig, stepped down, apparently over a disagreement with the board of directors regarding the disposition of eBay's Classifieds business. The company turned the reigns over to CFO Scott Schenkel while the board searches for a permanent replacement. 

It's against this backdrop that eBay is scheduled to release the financial results of its just-completed third quarter after the market close on Wednesday, Oct. 23. Let's take a look at eBay's second-quarter results, review the events that likely led to the CEO's departure, and identify what investors should be looking for when the tech giant reports earnings.

More tepid growth

For the second quarter, eBay reported revenue of $2.7 billion, up just 2% year over year, or up 4% when eliminating the impact of foreign currency exchange rates. The company reported adjusted diluted earnings per share of $0.68, surpassing the high end of management's forecasted range, which topped out at $0.63. 

Active buyers on the platform increased by 4%, growing to 182 million worldwide. Gross merchandise volume on eBay's Marketplace climbed to $21.5 billion, generating $2.2 billion in revenue, up about 1% compared to the prior-year quarter. StubHub revenue grew to $264 million, up 7% year over year, while sales of classifieds increased to $271 million, up 5%.

Another one bites the dust

eBay announced on Sept. 25 that its CEO had stepped down. "Given a number of considerations, both Devin and the Board believe that a new CEO is best for the Company at this time." Wenig countered in a tweet, saying, "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." 

The company also noted in its announcement that its previously announced operating review is ongoing, and that it expects to provide an update this fall.

Several news outlets have reported that the disagreement hinged on the board's decision to sell off eBay's Classifieds. Wenig's reference to the "new" board is referring to two new board members that have recently been installed at the urging of activist investors who been urging eBay to sell off some of its business units. 

Ongoing battle

It's worth looking back to see how this all started. Back in January, activist hedge fund Elliott Management became one of eBay's largest investors after announcing in an open letter that it had acquired a 4% stake in the e-commerce platform, at the time worth about $1.4 billion. This followed a 1% investment in eBay by Starboard Value, which was also agitating for change.

Elliott Management said in its communications that eBay was severely undervalued, and it urged the company's management to revitalize its marketplace and sell off some of its ancillary businesses, including ticket reseller StubHub and eBay's Classifieds.

In early March, eBay announced that it would undertake an internal review of the company's portfolio of assets, saying it was working with Elliott Management, Starboard Value, and "other significant shareholders" on these initiatives. The company eventually ceded two board seats to the activist investors and is considering the sale of the two business units.

What the quarter could hold

For the third quarter, eBay is guiding for revenue in a range of $2.61 billion and $2.66 billion, which would represent year-over-year growth of between 1% and 3%, excluding the impact of foreign currency exchange rate fluctuations. This would result in adjusted diluted earnings per share of between $0.62 and $0.65. 

Analysts' consensus estimates are squarely in line with eBay's forecast, calling for revenue of $2.64 billion and earnings per share of $0.64.  

The biggest item on shareholders' radars will be any announcement regarding the potential sale of StubHub or eBay Classifieds. The decision over whether to pursue these divestitures was obviously a contentious one, and it may have been the catalyst for the CEO's departure.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Danny Vena has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends eBay and recommends the following options: long January 2021 $18 calls on eBay. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on International Stock News

A woman sits in a cafe wearing a polka dotted shirt and holding a latte in one hand while reading something on a laptop that is sitting on the table in front of her
International Stock News

Prediction: This artificial intelligence (AI) stock could be the next Nvidia — and it's not what you think

Let's take a closer look at that name and see why it could turn out to be a solid addition…

Read more »

A woman in jeans and a casual jumper leans on her car and looks seriously at her mobile phone while her vehicle is charged at an electic vehicle recharging station.
International Stock News

Worried about Tesla's Robotaxi? These two words from Nvidia CEO Jensen Huang might change your mind.

Investors are on the edge of their seats as Tesla's robotaxi launch is reportedly around the corner.

Read more »

AI written in blue on a digital chip.
International Stock News

Warren Buffett has 23% of Berkshire Hathaway's portfolio invested in 2 AI stocks up 600% and 900% in the last decade

Here's what investors should know about these two stocks.

Read more »

Happy woman working on a laptop.
International Stock News

Want to invest in quantum computing? 3 stocks that are great buys right now.

They all give investors direct exposure to quantum computing, but aren't the all-or-nothing bets that some investors may regret going…

Read more »

A woman sits at her computer with her chin resting on her hand as she contemplates her next potential investment.
International Stock News

Billionaire Dan Loeb just sold Meta and Tesla stocks and piled into this hot AI stock up 1,500% over the past 5 years

Let's see what investors are thinking about these stocks today.

Read more »

A head shot of legendary investor Warren Buffett speaking into a microphone at an event.
International Stock News

Warren Buffett just spent $1.8 billion on 7 stocks. Here's the best of the bunch

Buffett's relatively small investments could be big opportunities for individual investors.

Read more »

Woman and man calculating a dividend yield.
International Stock News

This monster streaming stock has quietly crushed Netflix in 2025. Could a stock split be on the horizon?

Streaming stocks have crushed the market this year, and one name in particular has blown Netflix out of the water.

Read more »

Amazon boxes stacked up on a doorstep.
International Stock News

Why Amazon stock still looks like a long-term winner

Now might be a great time to add this dominant enterprise to your portfolio.

Read more »