< meta name="DC.Date.Valid.End" content="20050825"> Amendment Nine: Buried

Wednesday, February 09, 2005


Way deep in my inbox is a blurb on eBay's latest filing showing the 12/04 acquisition of Rent.com. I generally skip over such things, eBay is anything but distressed, but I remember thinking about the buyout and wondering what eBay is thinking. Here's the skinny: originally eBay bought Rent.com for $30M cash & $385M in stock. Not bad considering eBay's historical performance. Now though, its $415M, all cash. Why the change? For starters, eBay's recent stock slide, on 1/19/05 they missed their earnings estimate and traders punished it. It closed the year over $100, on 1/20/05, it was touching $80... ouch! eBay is clearly saying to the market, "you overshot, we're worth more per share." That's all fine and dandy, and the stupid traders again punished the stock a little today when they learned that an extra $385M in cash is going out of the company.

Here is where the opportunity lies. First, renting an apartment through a live auction. Huh? Yeah, think about it. We aren't there yet, but the promise for urban markets is pretty real. And eBay suddenly becomes a brokerage (which is all they are). Second, the extra cash out was essentially a stock buyback (before the stock was ever sold) so there is absolutely no reason to trim the target on the stock. If anything, you should expect eBay to go up. Just wanted to pass this along. I rarely get to think about companies like this, and its just such a clear play. Pour gratis.