Why StubHub Plunged, Then Recovered Today

Shares of StubHub (NYSE: STUB) fell as much as 9.7% on Thursday, before recovering to just a 3.1% decline by the end of the day's trading.

StubHub had already had a rough go of it in its short time as a public company, beginning the day at $6.36 per share -- a far cry from its $23.50 IPO price last September.

However, things went from tough to worse, as the Federal Trade Commission announced it was filing a lawsuit against the company, charging StubHub with violating the agency's "all-in" pricing initiative, which went into effect May 12, 2025.

That's bad news, but it appears investors also recognized that the violation likely lasted only a limited time. Therefore, the penalties may be relatively mild.

The FTC accuses StubHub of dragging its feet

For those unaware or who haven't bought event tickets over the past year, there has been a significant shift in the industry. The FTC mandated that ticketing platforms use "all-in" pricing beginning on May 12 of last year. "All-in" pricing means that the full price of the tickets, including fees, is disclosed upfront and at every stage of the checkout process, rather than tacked on as a "surprise" at final checkout.

Ironically, StubHub had been a proponent of the rule change in its official 2022 comments when the law was being considered. However, the FTC believes it caught StubHub violating the rule shortly after it was implemented last year.

The FTC alleges that rather than switching to all-in pricing on May 12, StubHub only began a "roll-out" process that lasted for a period long enough to encompass the May 14 rollout of the 2025 NFL schedule. The FTC noted that StubHub admitted in its "roll out" plan that the NFL schedule debut was a "99^th percentile traffic event" for StubHub. Thus, the agency suggested that StubHub purposefully slow-walked its rollout to delay all-in pricing until after NFL tickets went on sale. The suit even states that the FTC sent a letter to the company on May 14 warning of a potential violation, and that StubHub didn't respond.

Image source: Getty Images.

Why StubHub fell only modestly

Knowingly violating a federal rule and ignoring an FTC letter both seem like serious infractions, so one might wonder why StubHub fell "only" 3.1%.

There are likely multiple reasons. First, as stated above, StubHub's stock was already down significantly in March, and some investors may have anticipated legal trouble, given that the company took $30 million in litigation reserves in the fourth quarter.

Second, if the lawsuit applies only to a couple of days of ticket sales, it still wouldn't be a good thing, but it likely wouldn't amount to a major fine that could be fatal for the company. StubHub still had over $1.2 billion in cash on its balance sheet at the end of last year, so it can likely handle any punishment that only applies to a two-day violation of a rule.

StubHub stock still has significant risks, but it is a lowly valued stock that may be able to turn around. For investors with a large risk appetite, StubHub's beaten-down shares may be worth a look amid all the bad headlines.

Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.