eBay Could Be a Market-Beating Moneymaker, But It Needs to Stay Focused

On June 22, online marketplace eBay (NASDAQ: EBAY) acquired a specialty marketplace for non-fungible tokens (NFTs) called KnownOrigin. The press release said KnownOrigin was a "leading" NFT marketplace. As a cash-rich company, eBay is fully capable of funding this acquisition.

However, with limited growth opportunities, the company needs to be careful to not lose focus on shareholder returns. And buying KnownOrigin is a step in the wrong direction for this reason, in my opinion.

In my opinion, there are three main phases of a public company's lifecycle: needing capital, self-funding, and returning capital to shareholders. In phase one, unprofitable companies secure funding from banks and shareholders to build the business in hopes of achieving scale. In phase two, companies have achieved enough scale to be cash flow positive but they continue plowing all available resources into growing the business. By phase three, growth opportunities are limited and, therefore, cash flows should be used to reward shareholders.

Source Fool.com