Ebay Monster Gaps

$EBAY announced this morning they’re planning on splitting off the Pay Pal division into a separate publicly traded company next year. The market sees this as a major positive for shareholder value, and the stock has created a large gap up in the chart. First, a quick analysis of price action in the immediate aftermath of $EBAY historical upside price shocks reveals that the dominant pattern and edge is to the long side (see chart below). This is a THIN edge, at best. If the upside drift doesn’t play out, there are several other prominent patterns which provide potential roadmaps. A deep pullback and rally is common among patterns two, three, and four. Second, in the long-term a post Pay Pal $EBAY seems like a serious value killer and should be examined carefully as a short candidate. The first place to look is how poorly they’ve managed the product and community of acquisitions like Magento and Kijiji. The details of exactly how they plan on splitting the company and various insider ownership positions are also very important considerations. For more info on these types of restructurings, see the archives:

Special Situation Overview, Part 1

Special Situation Overview, Part 2

Special Situations, Part 3 — Bankruptcy mm-ebay-gap-up-analysis-sept-30-2014

 

Here is a link to the live version of the chart above if you want to play around and refine the filter settings for your own timeframe:

http://bit.ly/YHRTf1

 


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