Is eBay in Trouble?
Late last month, investors learned that e-commerce site eBay (NASDAQ: EBAY) would be selling StubHub to Viagogo for $4 billion in cash. The deal sends StubHub back to its co-founder Eric Baker, who is CEO of Viagogo. And although eBay has made a good return buying the company at $310 million back in 2007 and selling it back to him for more than 10 times that amount, it's still unclear what this means for eBay's future and whether it was a good decision.
The one obvious positive from this move is that it gives eBay more than $4 billion in cash. However, given that the company already has nearly $900 million of cash on its books and generated just under $3 billion in free cash flow over the trailing 12-month period, it's hard to see a pressing need for such a big war chest. The company hasn't been bleeding money, nor is it in danger of running short of funds.
Since it doesn't meet a pressing need, the deal raises a lot of questions, including the motivation behind it and future plans for all this extra money. The company's press release answered none of those questions. Interim CEO Scott Schenkel, who has been on the job since September, stated that the company believes that "this transaction is a great outcome and maximizes long-term value for eBay shareholders." This ambiguous statement says nothing about how this will translate into growth or help eBay create more value.
Source Fool.com
