Ebay Inc. (a)
UVA-F-1357
EBAY INC. (A) Gary Bengier, Chief Financial Officer and Vice President of Operations at eBay, clicked on the send button as he emailed the week's financial update to Pierre Omidyar, the company’s 31-year old chairman. It was September 15, 1998 and Wall Street was still reeling from a summer of severe market volatility. Much of the market's instability could be traced to bearish worries over a deepening and continuing economic crisis in Asia and other developing markets. Many investors feared that the U.S. economy would be unable to resist what was termed the “Asian Flu,” and that economic recession was eminent. Although U.S. interest rates were still low at yields of 4.0 percent for Treasury Bills and 5.6 percent for 30-year Treasury Bonds, the S&P 500 Index was down nearly 13 percent from its all time high set only two months earlier. After bottoming out at the end of August, the stock market had regained some upward momentum but with ongoing high volatility. Internet stocks, however, continued to decline in value. The Internet stock index (ISDEX) was off nearly 40 percent from its mid-July high. Exhibit 1 shows the path of the S&P 500 index and the ISDEX for the past three months, while Exhibit 2 presents the long-term trends in aggregate market volatility. Two months earlier while stock valuations were at record levels, eBay had begun the registration process with the Securities and Exchange Commission (SEC) for its first public stock sale. Since the market correction, many other companies with initial public offerings (IPOs), such as Internet firms Barnes&Noble.com, uBid, and netValue, Inc., had either canceled or postponed their issues. In fact, the past few weeks had been the quietest month for IPOs since the mid 1970s. Exhibit 3 provides the monthly number of canceled and postponed IPOs in 1998, relative to the number of offerings completed. Some investors speculated that eBay was likely to follow suit and either withdraw or postpone its
EBAY INC. (A) Gary Bengier, Chief Financial Officer and Vice President of Operations at eBay, clicked on the send button as he emailed the week's financial update to Pierre Omidyar, the company’s 31-year old chairman. It was September 15, 1998 and Wall Street was still reeling from a summer of severe market volatility. Much of the market's instability could be traced to bearish worries over a deepening and continuing economic crisis in Asia and other developing markets. Many investors feared that the U.S. economy would be unable to resist what was termed the “Asian Flu,” and that economic recession was eminent. Although U.S. interest rates were still low at yields of 4.0 percent for Treasury Bills and 5.6 percent for 30-year Treasury Bonds, the S&P 500 Index was down nearly 13 percent from its all time high set only two months earlier. After bottoming out at the end of August, the stock market had regained some upward momentum but with ongoing high volatility. Internet stocks, however, continued to decline in value. The Internet stock index (ISDEX) was off nearly 40 percent from its mid-July high. Exhibit 1 shows the path of the S&P 500 index and the ISDEX for the past three months, while Exhibit 2 presents the long-term trends in aggregate market volatility. Two months earlier while stock valuations were at record levels, eBay had begun the registration process with the Securities and Exchange Commission (SEC) for its first public stock sale. Since the market correction, many other companies with initial public offerings (IPOs), such as Internet firms Barnes&Noble.com, uBid, and netValue, Inc., had either canceled or postponed their issues. In fact, the past few weeks had been the quietest month for IPOs since the mid 1970s. Exhibit 3 provides the monthly number of canceled and postponed IPOs in 1998, relative to the number of offerings completed. Some investors speculated that eBay was likely to follow suit and either withdraw or postpone its