Online auctioneer eBay today priced its pending initial public offering at $18 a share, demonstrating strong demand for its shares despite recent volatility in the markets.
The IPO market, which has gone without a single deal during the past month, will be closely watching eBay's performance when it begins trading tomorrow on the Nasdaq Composite Index under the ticker symbol "EBAY."
The upgrade comes as Value America, another player in the Internet commerce space, said it would delay its IPO due to "market conditions prevailing for IPOs." In early July, amid a much brighter mood on Wall Street, the Charlottesville, Virginia, Internet retailer had registered to sell 5 million shares of stock. Unlike, eBay, however, Value America has yet to turn a profit.
eBay expects to raise about $63 million by floating out 3.5 million shares. Based on the target price set today and eBay's 39.7 million outstanding shares, the company will launch its IPO with a market value of $715.3 million.
Earlier today, eBay hiked up the price on its pending initial public offering to a range of between $16 and $18 per share, from a range of between $14 and $16, according to its lead underwriter Goldman Sachs.
During the first six months of 1998, the company reported profits of $348,000 on revenues of $14.9 million. The company also posted a $874,000 profit for the same period a year ago.
Analysts generally are impressed by eBay's early profitability, and by its willingness to hit the public trough during an especially volatile market.
"It's an incredibly bold statement by all parties involved," said David Menlow, president of IPO Financial Network. "There is no hype here. This is a solid company that is profitable, and that is atypical for virtually every other Internet company out there."
Initial offerings by Webcast company Broadcast.com and community builder GeoCities have been among the few bright spots in an otherwise soft IPO market this year. Broadcast.com shares more than tripled on the company's first day of trading, while GeoCities more than doubled on Day 1.
But the IPO market cooled in the heat of summer, causing some companies to postpone their planned offerings. In fact, the most recent IPO was by BankFirst on August 27, marking one of the longest droughts since early 1985, according to Securities Data.
"Every year at the end of the summer there is a slowdown in IPOs," Fleming said. "It's not like this is out of the ordinary, but it is a longer-than-normal vacation."
Fleming noted that in August, about 70 companies filed plans to go public in September. Now that number is down to only nine.
Among the companies that got burned with their IPO timing this summer is interactive ad agency 24/7 Media, which went public during the downturn and saw its share price get bruised as a result. "They got caught in the squall of the market," said Ken Fleming, an analyst at Renaissance Capital's IPO Fund.
News.com's Dawn Kawamoto contributed to this report.