Guest wellmont Posted July 8, 2014 Share Posted July 8, 2014 definition of a good business is people complain a lot about it but use it's product anyway? comcast comes to mind. coke - sugar water. banks. walmart. the list is long. ebay has a moat. there are some things that you can only easily sell on ebay. I don't think amazon covers lots of stuff you can buy and sell on ebay. I sold a used tennis racquet on ebay. I could not have sold it on Amazon. the numbers here suggest a protected business. this is not an easy business to compete with given all the buyers and sellers are there already. Plus there is a real possibility they split off Paypal, which would be very good for the stock. Link to comment Share on other sites More sharing options...
rpadebet Posted July 8, 2014 Author Share Posted July 8, 2014 Time for a real activist to get in here like ValueAct in MSFT last year, focus the management in the right direction(replace if necessary and possible) and fix the fixable operational issues. Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted July 9, 2014 Share Posted July 9, 2014 Plus there is a real possibility they split off Paypal, which would be very good for the stock. I think that splitting Paypal would be a TERRIBLE outcome. The company is worth a lot more with the parts together. There is synergy from Ebay and Paypal working together to fight fraud. Link to comment Share on other sites More sharing options...
rpadebet Posted July 9, 2014 Author Share Posted July 9, 2014 From the point of view of EBay markets, splitting paypal would be a "not so good" outcome. But if you consider Paypal as the dominant business of the future, being tied down to Ebay is probably a worse outcome. Paypal has a much longer runway for growth compared to Ebay Markets. Fraud fighting can be done independently. I don't see too many synergies to be honest. Anyway, if not an outright spin off, they should at least consider a "tracking stock" like John Malone usually does. Link to comment Share on other sites More sharing options...
Evolveus Posted July 9, 2014 Share Posted July 9, 2014 Time for a real activist to get in here like ValueAct in MSFT last year, focus the management in the right direction(replace if necessary and possible) and fix the fixable operational issues. In a recent Milken Institute conference, Jeffery Ubben said that they were building a position in eBay around $50, then Ichan came in and started tweeting about his position, pushing it into the public spotlight and pushing up the price beyond where ValueAct wanted to keep buying. Link to comment Share on other sites More sharing options...
ItsAValueTrap Posted July 9, 2014 Share Posted July 9, 2014 From the point of view of EBay markets, splitting paypal would be a "not so good" outcome. But if you consider Paypal as the dominant business of the future, being tied down to Ebay is probably a worse outcome. Paypal has a much longer runway for growth compared to Ebay Markets. Fraud fighting can be done independently. I don't see too many synergies to be honest. Anyway, if not an outright spin off, they should at least consider a "tracking stock" like John Malone usually does. I think that there are a lot of synergies between Ebay and Paypal. Ebay can pass valuable information onto Paypal so that Paypal can do a better job of guessing if fraud is happening or not. And if so, Paypal can freeze funds. I'm guessing that Ebay has some sort of system in place to detect suspicious listing patterns. For example, a fraudster can sell a lot of cheap items to pad their seller rating. Then the fraudster sells a bunch of expensive laptops and runs off with the buyers' money. Ebay probably has some algorithm to try to detect this and can pass all the information to Paypal. Paypal then understands that all of the transactions are high-risk and can appropriately place limits on how much money can be withdrawn from the seller's Paypal account. 2- Ebay pushes everybody into using Paypal. To some degree, this helps fight fraud. More payment methods create more vulnerabilities for fraudsters to exploit. Link to comment Share on other sites More sharing options...
klarmanite Posted July 31, 2014 Share Posted July 31, 2014 As the other member asked: does anyone have a copy of the 2013 analyst day presentation? Would really appreciate a copy. Link to comment Share on other sites More sharing options...
DTEJD1997 Posted August 4, 2014 Share Posted August 4, 2014 Hey all: I am now in the process of shutting down my Ebay businesses and burning off inventory. Ebay is now charging fees on known fraudulent transactions, UNLESS the seller does: A). reaches out to the buyer to try & salvage transaction B). Files a non-payment form & cancellation request C). If buyer does not agree to cancel transaction within 7 days, on the 8th day you escalate it and get it reviewed and get your seller's fees back. I was told by Paypal that is a violation of "Federal Regulation E". This regulation evidently prohibits banks & merchants from profiting off fraudulent transactions. It would appear that Ebay is in violation of this if they know that a transaction is fraudulent. They certainly would know it, as they own Paypal. It is also not good that Ebay & Paypal are not communicating and working together. This was the final straw that broke this camel's back. I am getting out of Ebay and will be done with it when i can get rid of inventory. I would think Ebay will face a class action lawsuit over this. Any thoughts? Link to comment Share on other sites More sharing options...
Myth465 Posted August 4, 2014 Share Posted August 4, 2014 EBay sucks for sellers. But I believe people prefer to use this thread to discuss the merits of Ebay for investors. Link to comment Share on other sites More sharing options...
DTEJD1997 Posted August 4, 2014 Share Posted August 4, 2014 EBay sucks for sellers. But I believe people prefer to use this thread to discuss the merits of Ebay for investors. Operational problems would be relevant for investors. I am not the only one with problems. Ebay's internal message boards are aflame with sellers who have problems. If it were a minor issue, it would not be worth mentioning. If it is a problem that is driving established sellers OFF of the system, AND opening them up to potential liability from a class action lawsuit...that is another thing. Time will tell, and we will see. Link to comment Share on other sites More sharing options...
ukvalueinvestment Posted August 4, 2014 Share Posted August 4, 2014 DTEJD1997: Whatever eBay is doing to upset sellers, is it fixable? Link to comment Share on other sites More sharing options...
DTEJD1997 Posted August 5, 2014 Share Posted August 5, 2014 DTEJD1997: Whatever eBay is doing to upset sellers, is it fixable? In some respects it is fixable...in others it is not... Ebay simply can't charge fees for fraudulent transactions. They can reverse/rethink/go back to their old policies and some of the problem is fixed going forward. On the other hand, they have permanently damaged their brand. My situation is the perfect example of this. I was contemplating buying a coin/bullion business/store. One the critical parts was being able to sell on Ebay. I am no longer pursuing that avenue. I will NOT invest a lot of time & capital to build any business on Ebay. In fact, I am now scaling back and burning off my inventory. I was also contemplating ramping up sales of IT equipment. This is what I originally started selling on Ebay back in the late 90's. I am no longer considering doing that. Ebay is simply too risky now to invest time & capital in. In a couple of months, when my inventory is largely depleted I will sell very easy items & very profitable items. Maybe 15-20 things. I have multiple accounts. If and when I lose "top rated seller" status in any account, it will become dormant. If all the accounts lose their top rated status, then no more sales at all (on Ebay). I imagine my sales volume will go down 75%+ from current low level and will likely be zero within 6-12 months. At my current low level of sales, Ebay & Paypal are getting about $1,200 a month in fees. In the past, that had been as high as $4k-$5k a month. So Ebay is getting about $14,440a year from me at current levels. Ebay sells for about 3.9X revenue. My accounts are therefore supporting about $56k or so to Ebay in market valuation. It will soon be significantly less. I know I am not the only one having this problem... Link to comment Share on other sites More sharing options...
dwy000 Posted August 5, 2014 Share Posted August 5, 2014 DTEJD - I sympathize with your issues with EBay. But there had to be a reason they made this switch in the first place, right? Do you know why? They wouldn't just risk angering all their sellers for no reason and miss out on the revenues. At some point, if the loss of sellers who are frustrated and angry like you more than offsets the underlying issue they were trying to resolve in the first place then they'll have to switch back. If they don't, then the upside of solving that problem was worth losing/angering sellers. Certainly the results of late show they're doing pretty well so something must be working. Or maybe it hasn't flowed through fully. Why did they make the change? Link to comment Share on other sites More sharing options...
DTEJD1997 Posted August 5, 2014 Share Posted August 5, 2014 DTEJD - I sympathize with your issues with EBay. But there had to be a reason they made this switch in the first place, right? Do you know why? They wouldn't just risk angering all their sellers for no reason and miss out on the revenues. At some point, if the loss of sellers who are frustrated and angry like you more than offsets the underlying issue they were trying to resolve in the first place then they'll have to switch back. If they don't, then the upside of solving that problem was worth losing/angering sellers. Certainly the results of late show they're doing pretty well so something must be working. Or maybe it hasn't flowed through fully. Why did they make the change? I am not certain why they made the changes. I suspect it is to get more revenue. Another possibility is that one of the customer service reps I spoke with about one of my many problems admitted that they didn't fully know what I was discussing, as they have never sold anything on Ebay. I suspect many of their current executives also have this same issue. How can you have these people running the business with such poor training? I resolved a few issues tonight by contacting Paypal first and then having PAYPAL contact Ebay & kick it up the chain of command. The workers at Paypal are MUCH more knowledgeable & professional than the ones at Ebay. For example, the case manager at Paypal sympathized with my problems and said that Ebay could not possibly be doing what they were doing. She had to move up the chain a few times, but she finally got a top supervisor in the USA who solved it. If it were not for Paypal, my immediate problems would not have been worked out. It boiled down to lower level workers not understanding Ebay policy fully and not taking the time to rationally think it out. For me, it is too late to solve problems. I've spent many hours working on these problems. I can't do this every time something crops up. Ebay is no longer a reliable business partner. I, and other sellers of IT equipment could be a relatively small segment of the whole. Perhaps used clothing & dvd's & such makes the majority of Ebay's revenues... I have other avenues to generate income, so I can leave Ebay. Other sellers are trying to move to Amazon & set up their own websites. Ebay still has a stranglehold & probably will for the near future. Will their stranglehold last forever? I doubt it. Link to comment Share on other sites More sharing options...
dwy000 Posted August 15, 2014 Share Posted August 15, 2014 Seth Klarman just loaded up on EBAY. He bought 4.5M shares last quarter. That's a pretty big vote of confidence from one of the best in the business. Link to comment Share on other sites More sharing options...
klarmanite Posted August 22, 2014 Share Posted August 22, 2014 Decent growth, ok valuation (certainly if you adjust for R&D pr Damodaran's preferred method (in Ebays case this approach yields an EPS multiple in the mid teens)), Icahn + Klarman + rumored spin-off + buybacks and capacity for increased leverage (not sure spinoff is desirable or likely for that matter). Pretty interesting investment I think. But not a no brainer like large cap tech was a few years ago in general or AAPL was at 400 USD. But then there aren't many obvious investment cases anymore in general if you ask me. So I guess Ebay is ok. On a related note I'm seriously struggling to get my long exposure up, constantly struggling with inner demons trying to convince me that mediocre investments are good enough. Very tiring. Link to comment Share on other sites More sharing options...
Wilson-TPC Posted August 22, 2014 Share Posted August 22, 2014 I think EBAY below 50 was a no-brainer. Paypal is the key here, eBAY is meh. Paypal is 75% of eBay's value. Link to comment Share on other sites More sharing options...
klarmanite Posted August 25, 2014 Share Posted August 25, 2014 Wilson - Why? Intrested to hear more details if you are willing to share. - K Link to comment Share on other sites More sharing options...
klarmanite Posted August 26, 2014 Share Posted August 26, 2014 http://www.nytimes.com/2014/08/25/technology/klarna-an-online-payment-system-popular-in-europe-eyes-global-expansion.html?_r=0 Link to comment Share on other sites More sharing options...
Wilson-TPC Posted August 26, 2014 Share Posted August 26, 2014 Definitely. I have a draft in the process... If I don't decide to publish it, i'll post it here. Overall, great growth, great scale, great moat. The 5 competitive forces are all aligned to a good business. Link to comment Share on other sites More sharing options...
klarmanite Posted August 26, 2014 Share Posted August 26, 2014 Looking forward to it! Link to comment Share on other sites More sharing options...
Wilson-TPC Posted November 18, 2014 Share Posted November 18, 2014 I take back my previous comment. PayPal is 100%+ of eBay's current trading price. Link to comment Share on other sites More sharing options...
rpadebet Posted November 18, 2014 Author Share Posted November 18, 2014 I take back my previous comment. PayPal is 100%+ of eBay's current trading price. Could you please share the rationale for valuing Paypal at 10x revenue? Link to comment Share on other sites More sharing options...
Wilson-TPC Posted November 18, 2014 Share Posted November 18, 2014 Some rational was from what peers are trading for, like MA and V. 10X P/S is about 22x EBITDA which is fair for a business that's asset light and grows top line at 20%. Throw whatever numbers you want, but at this price, PayPal is about 15x if EBAY trades at 8-9x EBITDA. Link to comment Share on other sites More sharing options...
hillfronter83 Posted November 24, 2014 Share Posted November 24, 2014 Some rational was from what peers are trading for, like MA and V. 10X P/S is about 22x EBITDA which is fair for a business that's asset light and grows top line at 20%. Throw whatever numbers you want, but at this price, PayPal is about 15x if EBAY trades at 8-9x EBITDA. Wilson, Why do you use EV/Revenue for your valuation? I looked at the numbers during the weekend and MA and V have much higher operating margin. Both are in 50% range while Paypal's more like 20%. Maybe because Paypal needs to pay MA and V for underlying transactions. If we use MA and V as comp, wouldn't multiple to operating income more relevant? The average of EV/OI is about 20 for MA and V. This will give Paypal a valuation of around $30 billion, a number around where current market is for Ebay. Link to comment Share on other sites More sharing options...
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