RealTime IT News

Wish We Had Loaned 'Em a Few Bucks

eBay Inc. founder Pierre Omidyar and his first full-time employee, Jeffrey Skoll, recently turned over stock now worth almost $2.4 billion to repay loans of $1.5 million.

In the new math of Internet company finance, though, the steep price of the loan was probably worth every penny, Bloomberg News said. In June 1997, when the Internet auction site was in its infancy, the executives each pledged 6.9 million shares as collateral for two $750,000 loans from Benchmark Capital, a Silicon Valley venture capital investor. The stock wasn't yet publicly traded, and the shares were valued at 11 cents apiece.

Benchmark in January exercised a clause in the loan contract that let it collect the collateral as payment, getting almost 13.8 million shares that today are worth $171.75 apiece--for a total of more than 1,500 times the loan amount.

"While it was a good investment for us, it was an even better decision on their part," Robert Kagle, one of Benchmark's founders and an eBay director, told Bloomberg.

Without the 1997 loans, eBay's founders might have sold the company for $50 million to one of several newspaper chains, Kagle said. The loans gave Omidyar and Skoll enough liquidity to let them continue running eBay as an independent concern. Now that it's the largest auction site on the Internet, eBay commands a market value of about $20.7 billion, based on today's share prices.

Omidyar, the company's chairman, now holds a stake worth almost $6.5 billion, even after giving up the stock pledged as loan collateral. And Skoll, now vice president of strategic planning, owns more than $3.9 billion of company stock.