Ebay - Became Public Company In 1998

In September 1998 eBay went public with an initial public offering (IPO) that raised more than $60 million. Potential investors were attracted by the fact that eBay would not have any money invested in inventory. Items that were auctioned over eBay remained the property of the seller, who received payment directly from the buyer. At no point would eBay take possession of an item to be sold or payment for an item. Sellers paid eBay a small commission for listing items, from $.25 to $2 per item. They could pay an additional $50 for additional promotion on the eBay site. When an item was sold, eBay received a percentage ranging from slightly more than one percent to five percent of the selling price.

According to the company's 1998 IPO prospectus, revenue for 1997 totaled $5.7 million. Net sales for the first half of 1998 were $14.9 million, with gross profits of $13.2 million. Earnings from operations for the first six months of 1998 were $2.8 million, and the company managed to earn net income of $348,000. During that period the number of registered users increased from 340,000 to more than 850,000. At the time of the IPO, founder and chairman Pierre Omidyar owned 42 percent of the company, and venture capital firm Benchmark Capital had a 21.5-percent interest after investing $5 million.

When eBay held its IPO in September 1998, investors quickly bid up the initial offering price of $18 to more than $54. After the stock settled down to around $47 a share, analysts noted that the valuation reflected consumer excitement over online auctions and investor awareness of the potential for profit. At the time, most Internet ventures were losing money.

Just before its IPO, eBay entered into a three-year agreement with America Online (AOL). In exchange for $12 million in payments to AOL, eBay became the exclusive online trading community for AOL. By October 1998 eBay's community had grown to more than 1 million registered users, and some 700,000 items were listed on eBay in more than 1,000 categories.