Net world watching eBay IPO
Amid a drought of initial public offerings to hit the equity markets, Internet auctioneer eBay Inc. increased its offering price to $16 to $18 a share from $14 to $16 a share. eBay is slated to go public with a 3.5 million-share issue on Thursday on the Nasdaq under the ticker EBAY.
The market for IPOs dried up and underwriters postponed offerings after the Nasdaq dropped from its peak in late July. Internet companies, such as 24/7 Media Inc. (Nasdaq:TFSM), that did enter the fray have seen their share prices decimated, sometimes below the offering price.
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"It's a double edged sword, since there hasn't been an IPO in a while," said Steven Tuen, analyst at IPO Value Monitor. "But then again, there might be some pent-up demand."
And eBay offers something unusual for an Internet company: it's already in the black. According to filings with the Securities and Exchange Commission, eBay had a profit of $874,000 on revenue of about $5.7 million in its last fiscal year. For the six months ended June 30, eBay made $215,000 on revenue of $14.9 million. eBay also has a strong business model that eliminates inventory problems. The company doesn't have any inventory. It matches buyers and sellers and takes a cut. The company said it has facilitated 15 million auctions.
eBay also sells just about everything -- antiques, coins, collectibles, computers, memorabilia, stamps and toys. Sellers pay placement fee-based on the minimum price for the item, ranging from $0.25 to $2, and can highlight their auction for additional fees, ranging from $2.00 to $49.95. Then, eBay charges the seller a success fee of 5 percent to 1.25 percent when the deal is consummated, and if the bid exceeds the minimum price.
As a public company, it will compete with Onsale Inc. (Nasdaq:ONSL), which expects to be profitable next year, Egghead.com Inc. (Nasdaq:EGGS), which has the SurplusAuction site.