Prospectus Summary
You should read the following summary together with the more detailed information regarding our company and the Common Stock being sold in this offering and our financial statements and notes to those statements appearing elsewhere in this prospectus. Unless otherwise indicated, all information in this prospectus (1) reflects a three-for-one stock split of the Common Stock effected in March 1999 and (2) assumes the Underwriters' option to purchase additional shares in the offering will not be exercised. See "Description of Capital Stock" and "Underwriting." References in this prospectus to "eBay," "we," "our," "us" and the "Company" refer to eBay Inc., its California predecessor and its consolidated subsidiary.
This prospectus contains forward-looking statements based on our current expectations about our company and our industry. You can identify these forward-looking statements when you see us using words such as "expect," "anticipate," estimate" and other similar expressions. These forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of the factors described in the "Risk Factors" section and elsewhere in this prospectus. We undertake no obligation to publicly update any forward- looking statements for any reason, even if new information becomes available or other events occur in the future.
eBay
We are the world's largest and most popular person-to-person trading community on the Internet, based on the number of items listed, number of users and minutes of usage per month. We pioneered online person-to-person trading. We have developed a Web-based community in which buyers and sellers are brought together in an efficient and entertaining auction format to buy and sell items such as antiques, coins, collectibles, computers, memorabilia, stamps and toys. Our service permits sellers to list items for sale, buyers to bid on items of interest and all eBay users to browse through listed items. Our 24-hour-a-day, seven-day-a-week service is fully automated, topically arranged, intuitive and easy to use.
From December 31, 1997 to December 31, 1998, the number of our registered users grew from approximately 340,000 to over 2.1 million. We hosted over 13.6 million auctions during the fourth quarter of 1998, up from 2.0 million auctions in the fourth quarter of 1997. As of December 31, 1998, we had over 1.0 million auctions listed in more than 1,000 categories. We believe that this critical mass of buyers, sellers and items listed for sale creates a cycle that helps us to continue to grow our user base. Sellers are attracted to our service as a result of the large number of potential buyers, and buyers in turn are attracted to our service by the broad selection of goods listed. Browsers and buyers can search auction listings for specific items or search by category, key word, seller name, recently commenced auctions or auctions about to end. Our auction format creates a sense of urgency among buyers to bid for goods and creates an entertaining and compelling trading environment. We also provide buyers and sellers a place to socialize and to discuss topics of common interest. This compelling trading environment fosters a large and growing commerce-oriented online community.
Our objective is to enhance our position as the world's leading online person-to-person trading community. Key elements of our strategy include the following:
. growing the eBay community and strengthening our brand, both to attract new members and to maintain the vitality of the eBay community;
. broadening our trading platform by growing existing product categories, promoting new product categories and offering services for specific regions;
. fostering eBay community affinity and increasing community trust and safety through services such as user verification and insurance;
. enhancing our website features and functionality through the introduction of personalization features such as About Me, which permits users to create their own home page free of charge on our website, and the Gallery, an opportunity for sellers to showcase their items as pictures in a photo catalog;
. expanding pre- and post-trade value-added services, such as assistance with scanning and uploading photographs of listed items, third-party escrow services and arrangements to make shipping of purchased items easier; and . developing international markets by actively marketing and promoting our website in selected countries.
We were formed as a sole proprietorship in September 1995, incorporated in California in May 1996 and reincorporated in Delaware in April 1998. Our principal executive offices are located at 2005 Hamilton Avenue, Suite 350, San Jose, California 95125. Our telephone number is (408) 558-7400 and our website is located at www.ebay.com. Information contained on our website is not a part of this prospectus.
The Offering
Shares offered by eBay.................. 4,250,000 shares Shares offered by the selling stockholders........................... 2,250,000 shares Shares to be outstanding after the offering............................... 125,092,222 shares(1) Use of proceeds......................... For general corporate purposes, principally working capital and capital expenditures. Nasdaq National Market symbol........... "EBAY" Summary Financial Information (in thousands, except per share data) Year Ended December 31, 1996 1997 1998
Statement of Income Data: Net revenues........................................... $ 372 $ 5,744 $ 47,352 Gross profit........................................... 358 4,998 40,493 Income from operations................................. 253 1,487 6,161 Net income............................................. 148 874 2,398 Net income per share(2): Basic................................................ $ 0.02 $ 0.04 $ 0.05 Weighted average shares--basic....................... 6,375 22,313 49,895 Diluted.............................................. $ 0.00 $ 0.01 $ 0.02 Weighted average shares--diluted..................... 42,945 82,660 114,590
Supplemental Operating Data: Number of registered users at end of period............ 41 341 2,181 Gross merchandise sales(3)............................. $7,279 $95,271 $745,395 Number of auctions listed.............................. 289 4,394 33,668
December 31, 1998 Actual As Adjusted(4) Balance Sheet Data: ------- -------------
Cash and cash equivalents................................ $31,790 $631,110 Short-term investments................................... 40,401 40,401 Working capital.......................................... 75,347 674,667 Total assets............................................. 92,483 691,803 Debt and leases, long-term portion....................... -- -- Total stockholders' equity............................... 84,445 683,765
(1) Based on shares of Common Stock outstanding as of March 1, 1999. Excludes: . 9,888,294 shares of Common Stock issuable upon the exercise of stock options outstanding as of March 1, 1999 at a weighted average exercise price of $11.14; and . 14,408,168 shares available for future grant or issuance under the Company's various benefit plans. See "Capitalization," "Management--Director Compensation," "Description of Capital Stock" and Notes 9 and 10 of Notes to Consolidated Financial Statements. (2) See Note 1 of Notes to Consolidated Financial Statements for a description of the method used to compute basic and diluted net income per share. (3) Represents the aggregate sales prices of all goods for which an auction was successfully concluded (i.e., there was at least one bid above the seller's specified minimum price or reserve price, whichever was higher). (4) Adjusted to give effect to the sale of the 4,250,000 shares of Common Stock offered by the Company hereby, at an assumed public offering price of $146.375, after deducting the estimated underwriting discount and estimated offering expenses. See "Use of Proceeds" and "Capitalization."