eBay, a people to people auction service, proves why the Internet may be under hyped and why it ought to be in the spotlight in a series of Internet initial public offerings teed up on Wall Street.
Despite not showing share data in its early filing, we estimate eBay may fetch $300 million to $350 million or between 10x and 12x annualized 1998 sales, under GeoCities and CitySearch multiples of between 40x and 24x.
GeoCities may be the most anticipated and we bring you the latest numbers there: 4.75 million shares at $13 target each. All in we figure GeoCities could fetch north of $525 million, more than 40x sales. But we also expect it to price at about $15 if the market stays receptive to Internet stocks. That implies GeoCities value of more than $600 million before we discount working capital.
But on a sales-to-sales, basis eBay’s results were about 300% more than either GeoCities or Web-based city entertainment and dining guide CitySearch, which could come public at about 24x sales.
It’s noteworthy that GeoCities and CitySearch open up new areas of Internet stocks: GeoCities in free Web pages (Websteaders) and CitySearch in local guides. How far behind CitySearch is AOL’s Digital Cities spinoff via IPO? Not far if CitySearch does well in the aftermarket.
Take a gander at the abacus spinning:
| IPO Parade Continues… | GeoCities | CitySearch | eBay |
| <<<<content ———————————————————-commerce>>>> | |||
free web | city guides | user auctions | |
Shares offered | 4.75 | 4.00 | ? |
Greenshoe | 0.71 | 0.60 | ? |
Target price | $ 13.00 | $ 13.00 | ? |
Proceeds | $ 61.75 | $ 52.00 | $ |
Shares out | 30.66 | 20.79 | ? |
Primary | $ 398.59 | $ 270.25 | ? |
FDS | 40.61 | 24.08 | ? |
FDS market | $ 527.94 | $ 313.08 | ? |
Working cap | $ 74.08 | $ 54.57 | ? |
Long-term debt | $ 0.78 | $ 2.32 | ? |
Enterprise | $ 454.64 | $ 260.83 | ? |
1997 sales | $ 4.58 | $ 6.18 | $ |
Six mos. To | $ 5.54 | $ 5.58 | $ |
Annualized | $ 11.08 | $ 11.15 | $ 29.84 |
MarCap/’98 | 36.0 | 24.2 | ? |
lead | Goldman Sachs | NationsBanc | Goldman |
| (c) 1998 Mecklermedia (NASDAQ:MECK) The Internet Media Company – all figures in millions except share price and multiples | |||
Note our handy <<content —- commerce>> line in the table. The closer you get to pure commerce the better. eBay’s model may be superior to the other two as it lets people drive its sales directly. Over 500,000 items are available daily including art and antiques. More than 500,000 users have joined eBay this year, with 3,000 more each day.
The service is about pure commerce, not portals, search or guides. eBay is a commerce exchange the same way Wall Street is. Bid and ask. It represents one of the best Web commerce models we’ve ever seen (as does rival ONSALE (NASDAQ:ONSL).
That said, GeoCities has a lot of commerce built into its topical “city.” Knowing who likes what and why is half the battle of selling anything. Dividing up its Web service along categories pre-qualifies GeoCities’ users to being sold ads and goods. While this isn’t a pure commerce exchange, the content provides a metaphor for commerce circling around it.
CitySearch challenges localized versions of Yahoo!, Lycos, Excite, AOL’s Digital Cities, and locally-produced Web guides. CitySearch “points” to commerce opportunities, sells ads based on topics, etc.
Of the three GeoCities could be the biggest, CitySearch could open the local guide space for IPOs and eBay may be the longer-term best of breed.
