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The report of eBay case

2021-09-27 来源: 51Due教员组 类别: Essay范文

各位留学生大家好!今天100due教员组给大家分享的是一篇市场营销essay代写范文,主要内容是讲:本报告旨在分析eBay,Inc.采用对比策略上市的过程。报告的主体部分包括四个部分:案例的背景介绍、问题的提出、问题的解决方案以及从投资者的角度对IPO过程的深入分析。易趣首次公开募股的一些建议作为高级技术信息提供。

The report of eBay case

1. Introduction

The purpose of this report is to analysis the process of the eBay, Inc. going public with antitheses strategy. The main part of the report includes four sections: a background introduction of the case, a raise of the question, proposed solution of the question and a deep analysis of the IPO process from the investors’ view. Several recommendations for eBay’s IPO are provided as advanced technical information

2. Case background

As one of the world’s largest online marketplace, the decision and procedure of eBay going public was a representative case. In 1998, the world’s economy and the confidence of investors were still recovering from the economy crisis in Asia and other developing markets. However, eBay management decided to keep up the company’s initial public offering during this quietest month for IPOs since the mid-1970s. Gary Bengier, as the Chief Financial Officer of eBay, had worries and concerns about whether the company should go to public or not.

3. The dilemma of IPO

The case examines the thought of eBay management to promote the company’s IPO. The problem rises in the IPO process. On one hand, delaying the IPO may cause financial lost, on the other hand, as a new Internet stock, the investment climate is bad and the price of the shares is challenged by investors and competitors. The company is facing such a dilemma in this crucial time. We believe that the main problem here causes the situation is whether eBay should go public now or wait. Based on the problem, we discussed and analyzed the IPO process of eBay based on the knowledge learnt.

4. Advantages and disadvantages of IPO

To solve the problem, we must understand the meaning of going public and whether a company should go public or not. For most people, the answer of going public probably might be “yes”. Going public is the measurement of the performance, scale and development prospect of a company. Normal inventors and some enterprise managers always skip the question and directly considered about in which market to go public. We cannot deny that the importance of going public in valuing a company. Many famous enterprises are public companies like Google, Apple, Coca Cola etc. However, there are still some famous companies which have not gone public, and some of them are even world's top 500 like Huawei. The reason for their not going public is not because of they are not qualified, but due to the unwillingness of the owners and managers. So, why are there so many concerns about going public? How to decide whether to go public or not?

To figure out these questions, the first thing we do is to understand the concept of stock exchange. As a product of industrial civilization and socialization of production, limited liability system of companies promotes the further industrialization and socialization. This is the most important advantage of company system. The limited liability system makes them to absorb as much social capital as they can to expand reproduction. However, there are many problems in the expanding, like how to accumulate scattered public money with low cost and high efficiency, or, how to enlarge the financing range (Sherman, 2000). With the continuously extending processing scale, the demand gap of reproduction capital is also growing, which makes it increasingly urgent for more capital. Moreover, the scale of middle class is rising, and they are trying to find a route for their saving to preserve or increase the value. Their money is not enough for them to found a company and becoming a shareholder is not possible for them. To some extent, they cannot bear the risk of entrepreneurship and concentrated investment. The stock exchange comes out as a convenient and fast way for companies to raise fund, and an investment channel for individual and family to invest.

The main reason for company going public is to raise money. For specific cases, Agricultural Bank of China (ABC) officially went public in Shanghai Stock Exchange in 2011. The IPO for ABC was 22.1 billion dollar which was the largest IPO case recently in China. The vast capital surely improved the market value and enriched its capital. In another case, the Apple Inc. went public in 1980 with 4.6 million shares, and 22 USD per share. The market value created by Apple’s IPOs was the highest of since Ford in 1956, which made 300 millionaires. The market value reached 1.7 billion in the first day of IPO. After 36 years, this value rose 18492% and broke through 604 billion USD. The company soon claimed to use the money in “the expand production of new technic development” and “research and development center building project”. Obviously, IPO helped with the expanded reproduction (Haruni, 2010).

There are mainly three advantages we summarized for a company going public as below.

First, the company could take advantage of the capital market to make a more normative development. Going to public is the process of a company to clear the development direction, improve management and make a solid foundation. Before going to public, a lot of research should be done to analyze the internal and external investment environment, and evaluate the advantages and disadvantages to make a perfect decision for future development. Many institutions will take part in the process like the sponsors, law office and accounting firm. These professional institutions help with property relations and regulate taxpaying. Also, they make contribute to establishment of modern enterprise system through reappraising the stocks and assets. Meanwhile, the risk of delisting and M&A could stimulate the managers to be honest and creditable, devote into the development of the company.  The company can built an incentive mechanism with concerning of stock rights after going to public. It can help attract the core managers and technical staff (Lipman, 2015).

Second, going public can bring a long term stable capital. For many companies, much of the fund comes from proprietary capital and retained income. Going public means the shared responsibility and profit, and it can make the capital structure reasonable to maximize the income. Persistent investment can be realized by financial instruments such as convertible bond, rationed and additional shares. There is no pressure of repay the capital and interest from going public unlike bank loan or other form of indirect financing. The company can invest more on product research which effectively increases the power of creativity and innovation.

Third, going public can improve the brand value and market influence of the company. Generally, there are three methods for an enterprise to spread its brand, public praise, advertisement and marketing. In fact, going public is more meaningful to the brand propagation. Going into the capital market is an admission of growing ability and market potential. The restructuring process for IPO has huge influence to the brand building. Prospectus and road show can show the corporate image, and everyday exchange quotation is the advertisement for inventors. Medias will also make follow-up reports to the business expansion and market operation of the company, which may attract the attention of thousands of inventors. The survey and industry analysis by institutional investors and securities analysts can dig the potential value of enterprise.

For the disadvantages, there are also three points. First, going pubic weakens the controlling of the company. The essence of going public is to get capital by selling stock right, which leads to reduce of controlling right to the company in some ways. Second, the company is not private after going public, and there is responsibility to fully release the information to public and even competitors, including the main business and market strategies. Meanwhile, comparing to un-public companies, the concentration of media may cause negative effects. Third, to protect the investors’ benefit, the main operating decisions of company need to perform the procedures after going public. This may lose the flexibility in management as a private company, and fulfill more obligations and responsibilities.  

5. The time for going public

Since there is significant market cycle features for Internet companies, the time for going public is crucial to investment. There are four periods for Internet companies: pioneering period, early growth period, stable growth period and mature period.

In the pioneering period, R&D and market requirement research are main work. The need of capital is not much because of the product is still in development. Although the cash flow is negative, there is no need for venture capital. In early growth period, the need for capital increases with the finalization of design and the launch of operation. There is also necessary to start the occupation and expansion of market. So, there is active demand for capital and management for the company, and the venture capital is needed to involve. When the company comes in the stable growth period, the selling of product has made the cash flow positive, and the market continues to expand. Since the limited cash flow, the income may not afford the outcome before, that means the company has not arrive the break-even-point. In the last period, the cash flow grows steadily because of the complete human, capital and market system. The company starts to make profit.

According to the theory, the time for going public, decided by the managers, is related to the market circle of the company. They always choose the third period as the start of going public because there is still need for capital. Before that, the company is still in an unstable state. The public will not invest in a company with uncertain future. While, the theory may not be total accurate in a complicate investment situation. Market scale, the status of capital market and the investment climate may also affect the time.  

6. eBay’s advantages

The main reason we think that eBay should go public is because the profit of the company is extremely high in the Internet industry. In the second season of 1998, the gross profit rate of eBay reached an incredible high point of 80%. In the same time, Amazon was only 22%, and Onsale was 9%. What’s more, the growth rate was not slowing down at all even in the quietest month for IPOs. From the first season of 1997 to the second season of 1998, the register number of eBay rocketed from 88,000 to 851,000, and the sale volume jumped from 1.76 million USD to 139.6 million USD. The huge profit and high expectancy make it possible to believe that there is no reason to delay the IPO date.

The advantage of eBay’s service and operation mode is obvious. There is no need for massive fund to purchase products, so there is no concern of cost problem. In the IPO, all the capital can be used to fulfill the service, technic and market. However,the disadvantage of eBay is the credit in trade. The main income of eBay comes from the commission of buyers and sellers. If there is no effective control of the risk of credit, there wouldn’t be any customers. So the company came up with the idea of an evaluation system to make sure that both the buyers and the sellers can know the credit and reliability level. This method also makes them rely more on the website because of their good credit point, and this is an intangible wealth for the market. There are also many other routes for the eBay management strategy.

In 1998, eBay was on the top of Internet business with a creative and innovation of management and good financial condition. So we believe that eBay should going public as soon as possible.

7. Conclusion

In this report, we focus on whether it is a proper time for eBay to go public in the background of a bad investment climate. We analyzed the cause of the problem and discussed the pros and cons for company going public. Furthermore, the time for going public is also discussed and we combined the specific situation of the financial status and management of eBay in the case. As the final solution, we think that it is the right time for eBay to go public.   

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