Ebay Inc.

35 Pages Posted: 30 Apr 1999

See all articles by Jason Burnett

Jason Burnett

University of California, Riverside (UCR)

Michael J. Schill

University of Virginia - Darden School of Business

Date Written: September 1998

Abstract

Subject Areas: Long-term financing, initial public offerings, new enterprise valuation Case Setting: September 1998, Silicon Valley, USA

Situation:

This case examines the Fall 1998 decision of eBay management to proceed with the company's initial public offering during the quietest IPO market in twenty years. In Case A, eBay's Chief Financial Officer considers the financial and competitive implications of delaying the offering, as well as the challenge of fairly pricing the shares of an emerging unseasoned Internet stock. The case provides an excellent forum for students to discuss the costs and benefits of going public. Case B reviews the events of eBay's first trading day and the associated 160 percent return on the shares. With such a backdrop, students are exposed to one of the well-known finance anomalies--the IPO underpricing phenomenon--and are invited to critically discuss various proposed explanations.

The case provides opportunities for the instructor to develop any of the following teaching objectives: (1) review the institutional aspects of the equity issuance transaction, (2) explore the costs and benefits associated with public share offerings, (3) examine the impact of market turbulence on the IPO market, (4) develop an appreciation for the difficulty of valuing unseasoned firms, and (5) evaluate the received explanations of various finance anomalies, such as the IPO underpricing anomaly.

Suggested Citation

Burnett, Jason and Schill, Michael J., Ebay Inc. (September 1998). Available at SSRN: https://ssrn.com/abstract=162829

Jason Burnett (Contact Author)

University of California, Riverside (UCR)

900 University Avenue
Riverside, CA 92521
United States

Michael J. Schill

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States
434-924-4071 (Phone)
434-243-7676 (Fax)

HOME PAGE: http://www.darden.virginia.edu/faculty/schill.htm

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