eBay Chief Accounting Officer Exit Amplifies TCGPlayer Due Diligence Concerns
eBay is hiring for Mergers & Acquisitions strategy, operations and people roles in wake of tumultuous TCGPlayer buyout, with a specific focus on due diligence and employee integration.
eBay's Chief Accounting Officer will be stepping down tomorrow with little public fanfare, raising serious questions about what led to his very sudden departure.
The saga started ~7 months ago, when eBay announced their intention to acquire collectible card game marketplace TCGPlayer as part of their "focus category strategy" on August 22, 2022.
The deal had an approximate total value of $295 million, with Evercore acting as exclusive financial advisor, Cooley LLP acting as legal counsel to TCGplayer and Freshfields Bruckhaus Deringer LLP acting as legal counsel to eBay in the transaction.
Closing was originally slated for Q1 2023, but was accelerated to October 31, 2022 in apparent eagerness to get TCGPlayer on the books as a "win" before end of year.
Founder and CEO Chedy Hampson remained at the helm and it was agreed that TCGPlayer would "continue to operate autonomously as one of the largest online marketplaces for trading card games."
Publicly, TCGPlayer buyers and sellers were wary about what being taken over by a corporate giant like eBay would mean for the business.
Privately, TCGPlayer authentication employees had similar concerns.
Those concerns became public on January 25, 2023 when authentication workers filed a petition to form a union and lodged their first unfair labor practices complaint with the National Labor Relations Board, with support from Communications Workers of America.
TCGPlayer management fought back against the union efforts, hiring noted anti-union law firm Littler Mendelson to represent their side. More NLRB complaints were filed in February and March as CWA accused TCGPlayer management of using coercive tactics and illegal interference to try to sway the outcome of the vote.
Meanwhile, eBay sat on the sidelines attempting to stay above the fray and did not engage directly with TCGPlayer employees, despite a letter sent to the Board of Directors reminding them of eBay's human rights policy which states, in part:
eBay also respects workers’ rights to unionize, and commits to bargain in good faith with any relevant associations or labor unions.
Lindsey Gancasz, an inventory specialist at TCGPlayer, disclosed that the acquisition of eBay played a significant role in her decision to join the unionization movement.
On March 10, 2023, TCGPlayer authentication workers won their vote to become the first US union in eBay history - but management did not take the defeat easily, releasing a statement saying they were "disappointed" in the outcome and filing multiple objections with NLRB seeking to have the vote overturned or disqualified.
Again, eBay sat silently on the sidelines, doing little to ensure TCGPlayer management acted in accordance with their human rights policy, even when a fourth NLRB complaint was filed on March 15 alleging the illegal retaliatory termination of a pro-union employee.
As tensions over the union situation continued on March 16, the broader implications for eBay's other labor-centric authentication operations and questions about due diligence in the TCGPlayer acquisition increasingly came into focus.
TCGPlayer employees had previously attempted to unionize in 2020, raising concerns and demands about working conditions, pay, and management transparency similar to those cited in this latest effort to organize.
eBay should have been able to anticipate and prepare for the possibility of facing unionization efforts following its acquisition, given that the agreement allowed Hampson and other crucial management personnel to remain in an environment with a documented history of "strained" labor relations.
Interestingly, eBay chose not to reveal to investors the potential risks that unionization efforts could bring until their latest 10-K submission to the SEC on February 23, 2023.
However, even after this disclosure, the company downplayed the potential impact.
Our business is primarily nonunionized, but we have some works councils outside the U.S. There has been a general increase in workers organizing to form or join a union in the U.S.
While we have not seen a material increase in such efforts among our employees, the unionization or related activism of significant employee populations could result in higher costs and other operational changes necessary to respond to changing conditions and to establish new relationships with worker representatives.
That statement was made one month after TCGPlayer employees filed their union petition and multiple unfair labor practices complaints with the National Labor Relations Board.
While eBay may not consider 272 employees "significant" within the total global headcount, any unionization efforts in the US are arguably a "material increase" from 0.
Could eBay have failed to consider the possibility of unionization efforts during the extensive vetting and negotiations preceding the acquisition, or did they merely perceive no obligation to disclose such risks to investors before the February 23 10-K filing?
In addition to the specific risks posed by TCGPlayer, the writing should have been on the wall when eBay started to move into in-house authentication with the Sneaker Con acquisition in 2021.
It was largely missed by media and analysts at the time, but at least one savvy scrutineer noted this was a "significant step-change" as eBay departed from the asset light, "just a venue" model that had previously protected it from unionization efforts which have targeted competitors like Amazon.
On the same day these questions began bubbling up, eBay announced a new director had been appointed to the board on March 14, effective immediately.
Shripriya Mahesh previously served as eBay's VP Product Management and Product Strategy in 2006. In 2013, she joined eBay founder Pierre Omidyar's First Look Media as Head Of Product and then later became Partner Emerging Tech at Pierre's "social change venture", Omidyar Network.
The reasons behind this appointment were made clear when an amended 8-K was filed on March 24 to show Mahesh will serve on the Risk Committee.
With questions about M&A due diligence as well as a $64M+ probable loss and possible criminal charges against the company stemming from the 2019 cyberstalking scandal both exposed in the February 23 10-K, now would certainly be a good time to circle the wagons on corporate governance and compliance issues.
Importantly, there was no sudden vacancy that needed to be filled - this appointment was an explicit decision to add an extra seat on the board at this specific time and to fill it with that specific person.
The timing and close Omidyar ties were very interesting to say the least, but things would get even more interesting the following week.
On March 20, TCGPlayer founder and CEO Chedy Hampson announced he would be stepping down, effective March 24, with eBay's VP Collectibles, Gene Cook, taking over while they search for a successor.
*UPDATE: eBay promoted GM Canada Robert Bigler to take the helm as the new CEO at TCGPlayer on April 10, 2023.
On March 22, eBay filed another 8-K with the SEC, this time advising Chief Accounting Officer Brian Doerger would be departing the company, effective March 31.
Senior Director, Global Controller Rebecca Spencer has been promoted and will take over on April 1 - but note the date Doerger agreed to step down.
Brian J. Doerger, Vice President, Chief Accounting Officer of eBay Inc. (the “Company”) will step down from his role effective March 31, 2023. This was agreed to on March 20, 2023.
Effective April 1, 2023, the Company appointed Rebecca Spencer as its Vice President, Chief Accounting Officer. In this position, Ms. Spencer will serve as the Company’s principal accounting officer. Mr. Doerger is expected to continue to serve the Company assisting with Ms. Spencer’s transition until May 31, 2023.
The overlap with the TCGPlayer events raises the question - is Doerger the scapegoat for apparent due diligence and/or disclosure failures in the TCGPlayer acquisition?
The role of the Chief Accounting Officer is certainly crucial in the M&A process, but it would be erroneous to assume he alone would have been responsible for ensuring all necessary measures were taken.
One wonders where Chief Legal Officer Marie Oh Huber and VP Deputy General Counsel M&A and Securities Molly Finn were when the acquisition was being expedited to meet the year-end deadline.
Given the extensive media scrutiny of Amazon labor relations, it's been surprising to see very little comparable mainstream media coverage of the historic eBay TCGPlayer union drive.
Engadget, Polygon, Gizmodo and Vice picked up the story early on with passing mention of eBay's acquisition of the marketplace last year, with Bloomberg covering the story as well after the vote was passed.
But even more surprising has been the complete media blackout of eBay's Chief Accounting Officer abruptly leaving in the midst of other major activity impacting the company.
No major business or financial media outlets have covered this shakeup and almost no one is asking any questions about what happened - at least not publicly.
If this were Amazon or even Etsy, such a sudden departure of the company's top accountant would certainly be noteworthy to financial press and analysts. But so far, the silence on eBay has been deafening.
Investigative journalist and author Gary Weiss is no stranger to corporate corruption - his award-winning career has covered major financial scandals including the Salomon Brothers bond trading scandal in the 1990s, the 2008 financial crisis and its aftermath, and exposing organized crime on Wall Street.
When asked for his thoughts on what may be happening at eBay, Weiss said "I'm a bit surprised that the press has largely overlooked the departure of eBay's accounting chief. This is a high-visibility company, so I guess the media simply doesn't understand how important that is, and what it could indicate."
The lack of public awareness and scrutiny surrounding the departure of eBay's Chief Accounting Officer, and concerns over the company's due diligence in its acquisition of TCGPlayer, raise serious questions about the role of media and financial industry oversight in safeguarding investors, employees, and customers alike.
Failure to conduct proper due diligence and provide transparency in strategic decision-making poses a significant risk of undermining trust in leadership. eBay must be held accountable to high standards of corporate governance and responsibility to protect all stakeholders involved.