Ebay Inc. a Composition

Auction web sites Inc. (a)

UVA-F-1357

EBAY INC. (A) Whilst gary Bengier, Main Financial Official and Vice President of Operations at auction web sites, clicked on the send switch as he emailed the week's financial revise to Calcul Omidyar, the company's 31-year outdated chairman. It was September 15, 1998 and Wall Street was still being reeling by a summer time of severe market unpredictability. Much of the market's instability could possibly be traced to bearish worries over a deepening and ongoing economic crisis in Asia and also other developing marketplaces. Many traders feared the U. T. economy will be unable to resist what was called the " Asian Flu virus, ” and that economic recession was eminent. Even though U. H. interest rates were still low at brings of 5. 0 percent for Treasury Bills and 5. six percent to get 30-year Treasury Bonds, the S& P 500 Index was down nearly 13 percent from its all period high collection only two months earlier. After bottoming out at the conclusion of September, the currency markets had regained some up momentum but with ongoing large volatility. Net stocks, however , continued to decline in value. The Internet stock index (ISDEX) was off almost 40 percent from its mid-July high. Show 1 reveals the path in the S& S 500 index and the ISDEX for the past 3 months, while Exhibit 2 shows the long lasting trends in aggregate industry volatility. 8 weeks earlier although stock value were in record levels, eBay acquired begun the registration process with the Investments and Exchange Commission (SEC) for its first public share sale. Because the market static correction, many other companies with first public offerings (IPOs), including Internet businesses Barnes& Respectable. com, uBid, and netValue, Inc., had either terminated or delayed their problems. In fact , the past few weeks have been the quietest month pertaining to IPOs because the mid 1971s. Exhibit three or more provides the regular monthly number of canceled and postponed IPOs in 1998, relative to the quantity of offerings finished. Some shareholders speculated that eBay was likely to follow suit and either take away or delay its providing. eBay The need for person-to-person trading was traditionally filled by consignment shops, valuable shows, flea markets, classified advertisements, and dealer shops. Sellers were generally necessary to pay for advertisements and providing space also to bear the complete cost of travel and advertising. These bigger costs were passed on to buyers through higher

The case was prepared by Jason Burnett and Teacher Michael L. Schill. It was written like a basis to get class discussion rather than to illustrate effective or ineffective managing of an management situation. Copyright пЈ© 1999 by the University or college of Virginia Darden University Foundation, Charlottesville, VA. Almost all rights appropriated. To buy copies, send out an e-mail to [email protected] com. Zero part of this kind of publication might be reproduced, trapped in a collection system, found in a chart, or sent in any contact form or by simply any means—electronic, mechanical, copying, recording, or perhaps otherwise—without the permission in the Darden Institution Foundation. в—Љ

-2-

UVA-F-1357

prices. These types of conventional trading venues suffered with relatively high inventory management costs and restricted marketplace coverage. The concept for Internet consignment arrived at Pierre Omidyar when his girlfriend, a devoted PEZ chocolate dispenser enthusiast, expressed her displeasure over the lack of ALQUITRAN trading lovers in the San francisco. Months later, in an effort to offer an Internet site exactly where PEZ enthusiasts could satisfy and produce transactions, Calcul founded amazon. Through Net consignment, Calcul was able to gain a much broader market without the excessive inventory management costs of regular consignment. Sellers and buyers could also get their trading forum round the clock, while the cost of Internet consignment would be significantly less to get both. Investors argued the time spent searching for things, and the social interaction mixed up in process, had been an important part of the collecting and trading knowledge. To...