Activist hedge fund Elliott Management Corp. has taken a $1.4 billion stake in eBay Inc. to push for changes at the online retailer, which it believes is underperforming compared with competitors.

The firm published its “Enhancing eBay Plan” in a letter to shareholders today. Elliot’s main recommendation is that the e-commerce giant sell off its online classifieds unit and the StubHub ticket marketplace, which both rank as among the largest services in their respective categories.

“While eBay’s core Marketplace continues to enjoy sustained growth and the two other franchises that eBay owns, StubHub and eBay Classifieds Group, are thriving, eBay suffers from a deeply depressed valuation due to its history of misexecution,” Elliott wrote in its letter.

The hedge fund argues that the units would be worth more as independent companies than as part of eBay. Elliott estimates that the classifieds business alone could achieve a market capitalization of $8 billion to $12 billion if it were sold, compared with $4.5 billion today. As for StubHub, the firm sees the unit’s business value potentially more than doubling to $4.5 billion in the event of a split from eBay.

Elliott is reportedly not alone in seeking a sale of the two divisions. The Wall Street Journal reported today that Starboard Value LP, another hedge fund, has quietly taken a stake in eBay and is holding talks with the company about selling the divisions. This isn’t an unfamiliar situation for the online retailer: Investors previously pressured it to spin off PayPal Holdings Inc. in 2015.

Beyond creating value for shareholders, Elliott argues, selling the classified business and StubHub would enable eBay to focus more sharply on its core e-commerce marketplace. The company is facing growing competition from bigger rival Amazon.com Inc. along with countless smaller players.

Elliott sees room for improvement in that area, too. The hedge fund is calling for eBay to place a stronger emphasis on making “operational execution and continued enhancements” to its e-commerce marketplace, as well as take steps to increase operational efficiency. The company laid off about 300 employees last June as part of its cost-cutting efforts.

In its shareholder letter, Elliot made the claim that eBay’s stock price could nearly double to between $56 and $63 per share if the suggested changes are implemented.

The firm’s letter and disclosure of its $1.4 billion stake drove the online retainer’s shares up as much as 9.5 percent this morning. The stock closed up about 6 percent higher from its Friday closing price on a day when the tech-heavy Nasdaq fell almost 2 percent.

Photo: eBay