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eBay (NASDAQ: EBAY)'s decision to double its borrowing capacity is being interpreted, for the most part, as a positive move that could be the prelude to a potential material event - a special dividend payout, a share buyback, or merger & acquisition.
But before you run out to place an immediate buy order for EBAY, which traded 47 cents lower to $35.53 late Monday afternoon, here are a few points of caution that encourage one to reflect before parting with one's earned cash.
-First there is the online auction space: there's discussion in online and e-commerce circles that the online auction space is approaching saturation - or at least is going through a period of stagnation - in the developed world markets [primarily North America and Europe]. For one, convenient short-hand barometer of this, the reader can scan the covers Time or Newsweek magazine. Q: When was the last time eBay or a comparable auction site was featured as "the rage" on the cover, the way, for example, the iPod has been? Also, can you think of 2 or 3 industry sources who make reference to "the burgeoning / exploding-growth online auction space"? Further, with the developed markets likely to register less-than-moonshot growth results in the immediate years ahead, it remains an open question whether eBay and other sites can replace double-digit growth with Asia-based [particularly China-based] growth.
-Second, and equally significant, there is the current stock market, which those in the Concrete Canyon refer to as "the current equity market climate." Frequently, share buybacks are interpreted as positive events for companies and shareholders, as they're often viewed as a company seizing the day to buyback its undervalued shares - shares that are at a bargain price. Still, investors need to keep in mind that a company's buyback decision looks good only if, in fact, the company's shares were undervalued. If, in fact, the shares continue to fall, the decision will not look so good.
Have you seen eBay's price recently, say since mid-2005? It's not up. That fact, combined with the facts that the U.S. stock market is long overdue for a 10% correction, that correction may have already started, real interest rates and credit risk premiums are rising, oil prices remain at near-record levels despite oil producers' willingness to sell every drop, the U.S. economy may be slowing, and that the U.S. Federal Reserve shows few signs that it will lower short-term interest rates soon, present an environment that will make it hard for many stocks to rise - headwinds you may wish to contemplate before plunking down that cold, hard cash right now on eBay.
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Reader Comments (Page 1 of 1)
8-13-2007 @ 9:16PM
Carmi Turchick said...
People considering this stock should examine the new Non-Performing Seller policy on eBay. This policy nukes the accounts of even good sellers who get a few unhappy buyers, sometimes only one. Small sellers are especially vulnerable. Over time this policy will drive away many sellers and force others to refuse to sell to new buyers. Many sellers are extremely upset with eBay. No appeal is allowed. Selling restrictions are not what the seller is told they will be and duration seems random.
This policy continued for long will shut down eBay auctions
8-14-2007 @ 10:30AM
Jeff Fleming said...
Another point that should be considered before investing in eBay...
Recently eBay has taken a position to suspend sellers without recourse. I was a member & a stockholder of eBay until I was suspended from listing my wares for a period of 2 weeks. When I tried to get an answer from eBay as to why I was suspended my request fell on deaf ears.
My record since 1998 was at 99.5% approval with over 18,800 positive feedbacks left for me. Only 22 negative feedbacks left for me in that same period of time. My average sale was between 7.00 & 8.00 per transaction. You can do math...
Because of my suspension & eBay's refusal to reply to my emails questioning their action I closed my eBay selling account & my PayPal account.
Goodbye Meg! Your greed & lack of customer service & customer appreciation amazes me.
I can only hope that Google or Yahoo is around the corner to offer an auction site that is more user friendly.
Last but not least...Lets not forget eBays lack of addressing the fraud & identity theft that runs rampant on ebay!
Amen
8-14-2007 @ 12:20PM
Mozelle said...
I for one am hoping that eBay will pay their shareholders a one time big fat dividend! This stock has stalled way toooo long.
Pay-Pal is what makes eBay money. Pay-Pal is making all the money and will continue to make the money!
I just hope they make their shareholders happy for a change!
8-14-2007 @ 8:04PM
Nichola Sharpe said...
We thought it is important to clarify and address concerns expressed by Carmi in the first comment.
I work for eBay and on Monday morning we made this announcement to our community of buyers and sellers to explain the enforcement of our Seller Non-Performance Policy - http://www2.ebay.com/aw/core/200708.shtml#2007-08-13104345 .
We wanted to make clear that this initiative only affects a very small minority of sellers who do not maintain minimum standards in buyer satisfaction. Also, our goal in restricting or sanctioning this minority of sellers is always to drive them to resolve their business challenges, improve their satisfaction rates, and remain in the marketplace as successful sellers.
To address specifically Carmi's concerns, we are not going after good sellers or making smaller sellers vulnerable. Just 1% of sellers currently cause 35% of bad buyer experiences on the site so it is this group we are targeting.
Additionally, for this small minority of sellers, we are trying to be more transparent in our direct communication to them to educate and inform them about the policy and how to improve their buyer satisfaction rates.
The entire reason we are implementing this policy is part of eBay's on-going commitment to maintain a safe trading environment and improving overall buyer experience which will ultimately benefit both trustworthy sellers and buyers.
8-14-2007 @ 11:14PM
Allen Jones said...
Both buyers and sellers on eBay have always been told that neutral feedback was viewed as not good or bad feedback. Now eBay is declaring neutrals as negative feedback and using them to determine that bottom 1% of bad sellers. eBay is now telling their sellers to work with their buyers to get a negative or neutral feedback mutually withdrawn to shorten a sellers 14 day suspension. I now believe that eBay will no longer be able to hide behind their "venue only status" if they use the voluntary feedback system to penalize sellers from selling on their site.
As for ebay being the "only auction site" and treating their Paying customers like yesterdays trash. I remember when AOL was king of the hill just a few short years ago and now they can't give their product away for free.
8-16-2007 @ 12:22PM
Jeff Fleming said...
The eBay employee's blog amusing to say the least! I was suspended by eBay for 2 weeks under their new policy. I encourage anyone to visit my eBay site - buzltyr837 - & explain to me what I did wrong to merit the suspension! I've eBay to explain in several emails to them without any reply! Their customer service (a true oxymoron) is the worst of ANY company large or small. What's even more amusing that eBay is reading these blogs & replies to them but REFUSES to read their emails & reply to those who have been frustrated with their actions.
I have since closed my eBay selling account & my PayPal account.
My future is with my own website in tandum with Google & Yahoo! Goodbye eBay...Goodbye Meg & Company..Wallow in your GREED!