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As filed with the Securities and Exchange Commission on December 22, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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eBAY INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
Delaware 7389 77-0430924
<S> <C> <C>
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
2125 Hamilton Avenue
San Jose, California 95125
(408) 558-7400
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
Michael R. Jacobson
Vice President, Legal Affairs, General Counsel and Secretary
2125 Hamilton Avenue
San Jose, California 95125
(408) 558-7400
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
Kenneth L. Guernsey
Michael J. Sullivan
Karyn S. Tucker
Virginia C. Edwards
Erin A. Sawyer
Cooley Godward LLP
One Maritime Plaza, 20th Floor
San Francisco, CA 94111
(415) 693-2000
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after the Registration Statement becomes effective.
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If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
number for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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<CAPTION>
Proposed
Proposed Maximum
Title of Class of Maximum Aggregate
Securities to be Amount to be Offering Price Offering Amount of
Registered Registered per Share(1) Price(1) Registration Fee
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<S> <C> <C> <C> <C>
Common Stock, par value
$0.001 per share...... 494,133 $149.46875 $73,857,442 $19,499
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee based
on the average of the high and low sales prices of the common stock on the
Nasdaq National Market on December 16, 1999.
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment that specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. The +
+selling stockholders may not sell these securities until the Registration +
+Statement filed with the Securities and Exchange Commission is effective. +
+This prospectus is not an offer to sell these securities and it is not +
+soliciting any offer to buy these securities in any state where the offer or +
+sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
(December 21, 1999)
eBAY INC.
494,133 Shares
Common Stock
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<C> <S>
The Selling Stockholders: The selling stockholders identified in this prospectus
are selling 494,133 shares of our common stock. We are
not selling any shares of our common stock under this
prospectus and will not receive any of the proceeds from
the sale of shares by the selling stockholders.
Offering Price: The selling stockholders may sell the shares of common
stock described in this prospectus in a number of
different ways and at varying prices. We provide more
information about how they may sell their shares in the
section titled "Plan of Distribution" on page 22.
Trading Market: Our common stock is listed on the Nasdaq National Market
under the symbol "EBAY." On December 21, 1999, the
closing sale price of our common stock, as reported on
the Nasdaq National Market, was $144.375.
Risks: Investing in our common stock involves a high degree of
risk. See "Risk Factors" beginning on page 4.
</TABLE>
The shares offered or sold under this prospectus have not been approved by
the Securities and Exchange Commission or any state securities commission, nor
have these organizations determined that this prospectus is accurate or
complete. Any representation to the contrary is a criminal offense.
The date of this prospectus is , 1999
eBay and the eBay logo are our registered trademarks. This prospectus also
includes trade dress, trade names and trademarks of other companies. Our use or
display of other parties' trademarks, trade dress or products is not intended
to and does not imply a relationship with the trademark or trade dress owners.
<PAGE>
PROSPECTUS SUMMARY
The following is a summary of our business. You should read carefully the
section entitled "Risk Factors" in this prospectus, our Annual Report on Form
10-K for the year ended December 31, 1998, our Quarterly Reports on Forms 10-Q
for the quarters ended March 31, 1999, June 30, 1999 and September 30, 1999 and
our Current Reports on Form 8-K filed in May, June, July and September, 1999
for more information on our business and the risks involved in investing in our
stock.
In addition to the historical information contained in this prospectus, this
prospectus contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Exchange Act of 1934.
These statements may be identified by the use of words such as "expects,"
"anticipates," "intends," "plans" and similar expressions. The outcome of the
events described in these forward-looking statements is subject to risks and
actual results could differ materially. The sections entitled "Risk Factors"
beginning on page 4 of this prospectus, and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business" in
our Annual Report and Quarterly Reports contain a discussion of some of the
factors that could contribute to those differences.
eBay
Overview
We pioneered online person-to-person trading by developing a Web-based
community in which buyers and sellers are brought together in an efficient and
entertaining auction format to buy and sell personal items such as antiques,
coins, collectibles, computers, memorabilia, stamps and toys. The eBay service
permits sellers to list items for sale, buyers to bid on items of interest and
all eBay users to browse through listed items in a fully-automated, topically-
arranged, intuitive and easy-to-use online service that is available 24-hours-
a-day, seven-days-a-week. We have extended our online offerings with the
acquisitions of alando, an international online person-to-person trading
community, and Billpoint, a provider of online billing and payment solutions.
Recently, we have expanded beyond our online origins into the traditional
auction business with our acquisitions of Butterfield & Butterfield and Kruse
International.
Our online business model is significantly different from many existing
online auction and other electronic commerce businesses. Because individual
sellers, rather than eBay, sell the items listed, we have no procurement,
carrying or shipping costs and no inventory risk. Our rate of expense growth is
primarily driven by increases in personnel, expenditures for advertising and
promotion and depreciation on site hardware and software. We intend to continue
investing in site infrastructure and expect to increase our expenses
significantly, in particular our advertising, promotion and personnel expenses,
in an effort to maintain revenue growth. We remain committed to a long-term
growth strategy that combines the best elements of community and e-commerce,
and we will continue to invest prudently but aggressively to maintain our
leadership role in online personal trading.
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 2125 Hamilton Avenue, 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.
Acquisitions
Butterfield & Butterfield
On May 28, 1999, we acquired Butterfield & Butterfield Auctioneers
Corporation, a Delaware corporation and all affiliated entities under common
control including: Butterfield Credit Corporation Inc., 111 Potrero Partners,
LLC and HBJ Partners, LLC. We collectively refer to these companies in this
prospectus as B&B or
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the B&B Companies. The aggregate consideration exchanged for the merger was
1,327,370 shares of our common stock. The merger has been accounted for as a
pooling of interests. In April 1999, B&B withdrew its registration statement
for its initial public offering. Accordingly, in the second quarter of 1999, we
recorded a charge of approximately $2.6 million related to the costs of the
withdrawn offering. These amounts are included in merger related costs on the
condensed consolidated statement of income.
Kruse International
On May 18, 1999, we acquired Kruse, Inc., d/b/a Kruse International, and all
affiliated entities under common control including: Auburn Cordage, Inc., ACD
Auto Sales, Inc., Reppert School of Auctioneering, Inc. and Classic Advertising
& Promotions, Inc., each an Indiana corporation. We collectively refer to these
companies in this prospectus as Kruse or the Kruse Companies. The Kruse
Companies conduct auctions, perform appraisal services and auctioneering
training for classic car auctions in various locations in the United States,
England, Germany and the Netherlands. The aggregate consideration exchanged for
the merger was 787,312 shares of our common stock for all shares of capital
stock of the Kruse Companies. We accounted for the merger as a pooling of
interests.
Billpoint
On May 25, 1999, we acquired Billpoint, Inc., a California corporation.
Billpoint has developed a centralized, turnkey authorization, billing and
payment fulfillment solution that permits individuals and small merchants to
accept credit cards as payment for Internet-based sales transactions.
Billpoint's service is expected to derive revenues based upon a variety of fee
arrangements, including percentage-of-transaction, fixed-fee per transaction
and flat monthly rates. In connection with the merger, we issued a total of
approximately 525,000 shares of our common stock to the existing shareholders
of Billpoint as consideration for all shares of capital stock of Billpoint, and
all options and warrants to purchase shares of common stock of Billpoint
outstanding immediately prior to the consummation of the merger were converted
into options and warrants to purchase shares of our common stock. We accounted
for the merger as a pooling of interests.
alando
On June 15, 1999, we acquired alando.de.AG. alando is Germany's leading
online person-to-person trading community. The aggregate consideration
exchanged for the merger was 316,000 shares of our stock. We accounted for the
merger as a pooling of interests.
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RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones facing our company. Additional risks and uncertainties not presently
known to us or that we currently deem immaterial also may impair our business
operations. If any of the following risks actually occur, our business could be
harmed. In such case, the trading price of our common stock could decline, and
you may lose all or part of your investment.
We have a limited operating history
Our company was formed as a sole proprietorship in September 1995 and we
incorporated in May 1996. We have only a limited operating history on which you
can base an evaluation of our business and prospects. As an online commerce
company in the early stage of development, we face increased risks,
uncertainties, expenses and difficulties. You should consider an investment in
our company in light of these risks, uncertainties, expenses and difficulties.
To address these risks and uncertainties, we must do the following:
. maintain and increase our number of registered users, items listed on
our service and completed auctions;
. maintain and grow our website and customer support operations at
reasonable cost;
. continue to make trading through our service safer for users;
. maintain and enhance our brand;
. successfully execute our business and marketing strategy;
. continue to develop and upgrade our technology and information
processing systems;
. continue to enhance our service to meet the needs of a changing market;
. provide superior customer service;
. respond to competitive developments; and
. attract, integrate, retain and motivate qualified personnel.
We may be unable to accomplish one or more of these things, which could
cause our business to suffer. In addition, accomplishing one or more of these
things might be very expensive, which could harm our financial results.
Our operating results may fluctuate
Our operating results have varied on a quarterly basis during our short
operating history. Our operating results may fluctuate significantly as a
result of a variety of factors, many of which are outside our control. Factors
that may affect our quarterly operating results include the following:
. our ability to retain an active user base, to attract new users who list
items for sale and who purchase items through our service and to
maintain customer satisfaction;
. our ability to keep our website operational and to manage the number of
items listed on our service;
. the amount and timing of operating costs and capital expenditures
relating to the maintenance and expansion of our business, operations
and infrastructure;
. federal, state or local government regulation, including investigations
prompted by items improperly listed or sold by our users;
. the introduction of new sites, services and products by us or our
competitors;
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. volume, size, timing and completion rate of trades on our website;
. consumer confidence in the security of transactions on our website;
. our ability to upgrade and develop our systems and infrastructure to
accommodate growth;
. technical difficulties or service interruptions;
. our ability to attract new personnel in a timely and effective manner;
. our ability to retain key employees in both our online businesses and
our new acquisitions;
. the ability of our land-based auction businesses to acquire high quality
properties for auction;
. the timing, cost and availability of advertising in traditional media
and on other websites and online services;
. the timing of marketing expenses under existing contracts;
. consumer trends and popularity of some categories of collectible items;
. the success of our brand building and marketing campaigns;
. the level of use of the Internet and online services;
. increasing consumer acceptance of the Internet and other online services
for commerce and, in particular, the trading of products such as those
listed on our website; and
. general economic conditions and economic conditions specific to the
Internet and electronic commerce industries.
Our limited operating history and the emerging nature of the markets in
which we compete make it difficult for us to forecast our revenues or earnings
accurately. We believe that period-to-period comparisons of our operating
results may not be meaningful and you should not rely upon them as an
indication of future performance. We do not have backlog, and almost all of our
net revenues each quarter come from auctions that are listed and completed
during that quarter. Our operating results in one or more future quarters may
fall below the expectations of securities analysts and investors. In that
event, the trading price of our common stock would almost certainly decline.
Our failure to manage growth could harm us
We currently are experiencing a period of significant expansion in our
headcount, facilities and infrastructure and we anticipate that further
expansion will be required to address potential growth in our customer base and
market opportunities. This expansion has placed, and we expect it will continue
to place, a significant strain on our management, operational and financial
resources. The areas that are put under severe strain by our rate of growth
include the following:
. The Website. We must constantly add new hardware, update software and
add new engineering personnel to accommodate the increased use of our
website. If we are unable to increase the capacity of our systems at
least as fast as the growth in demand for this capacity, our website may
become unstable and may cease to operate for periods of time. We have
experienced periodic unscheduled downtime. Continued unscheduled
downtime could harm our business and also could anger users of our
website and reduce future revenues.
. Customer Support. We must expand our customer support operations to
accommodate the increased number of users and transactions on our
website. If we are unable to hire and successfully train sufficient
employees or contractors in this area, users of our website may have
negative experiences and current and future revenues could suffer.
. Customer Accounts. Our revenues are dependent on prompt and accurate
billing processes. If we are unable to grow our transaction processing
abilities to accommodate the increasing number of transactions that must
be billed, our ability to collect revenue will be harmed.
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We must continue to hire, train and manage new employees at a rapid rate.
The majority of our employees today have been with us less than one year and we
expect that our rate of hiring will continue at a very high pace. If our new
hires are not good hires, or if we are unsuccessful in training and integrating
these new employees, our business may be harmed. To manage the expected growth
of our operations and personnel, we will need to improve our transaction
processing, operational and financial systems, procedures and controls. Our
current and planned personnel, systems, procedures and controls may not be
adequate to support our future operations. We may be unable to hire, train,
retain and manage required personnel or to identify and take advantage of
existing and potential strategic relationships and market opportunities.
We may not maintain profitability
We believe that our continued profitability and growth will depend in large
part on our ability to do the following:
. maintain sufficient transaction volume to attract buyers and sellers;
. manage the costs of our business, including the costs associated with
maintaining and developing our website, customer support and
international expansion;
. increase our brand name awareness; and
. provide our customers with superior community and trading experiences.
We are investing heavily in marketing and promotion, customer support,
further development of our website, technology and operating infrastructure
development. The costs of these investments have reduced our margins and are
expected to remain significant into the future. In addition, we have
significant ongoing commitments in some of these areas. As a result, we may be
unable to adjust our spending rapidly enough to compensate for any unexpected
revenue shortfall, which may harm our profitability. The emergence of
competitors, many of whom are offering free auctions to users, limits our
ability to raise user fees in response to declines in profitability. In
addition, we are spending in advance of anticipated growth, which may also harm
our profitability. Our historic growth rates are not sustainable and we expect
in the near term that our costs, particularly those related to site operations,
customer support, other infrastructure and our international, regional and
premium initiatives, will increase substantially. In view of the rapidly
evolving nature of our business and our limited operating history, we believe
that period-to-period comparisons of our operating results are not necessarily
meaningful. You should not rely upon our historical results as indications of
our future performance.
Acquisitions could result in dilution, operating difficulties and other harmful
consequences
If appropriate opportunities present themselves, we intend to acquire
businesses, technologies, services or products that we believe are strategic.
We recently completed the four acquisitions described earlier in this document
as well as several smaller acquisitions. The process of integrating any
acquisition may create unforeseen operating difficulties and expenditures and
is itself risky. The areas where we may face difficulties include:
. diversion of management time (both ours and at the acquired companies)
during the period of negotiation through closing and further diversion
of such time after closing from focus on operating the businesses to
issues of integration and future products;
. decline in employee morale and retention issues resulting from changes
in compensation, reporting relationships, future prospects, or the
direction of the business;
. the need to integrate each company's accounting, management information,
human resource and other administrative systems to permit effective
management and the lack of control if such integration is delayed or not
implemented; and
. the need to implement controls, procedures and policies appropriate for
a larger public company at companies that prior to acquisition had been
smaller, private companies.
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We have almost no experience in managing this integration process. Most of
our acquisitions to date have involved either family run companies or very
early stage companies, which may exacerbate these integration issues. Moreover,
the anticipated benefits of any or all of these acquisitions may not be
realized. Future acquisitions could result in potentially dilutive issuances of
equity securities, the incurrence of debt, contingent liabilities or
amortization expenses related to goodwill and other intangible assets, any of
which could harm our business. Future acquisitions may require us to obtain
additional equity or debt financing, which may not be available on favorable
terms or at all. Even if available, this financing may be dilutive.
The inability to expand our systems may limit our growth
We seek to generate a high volume of traffic and transactions on our
service. The satisfactory performance, reliability and availability of our
website, processing systems and network infrastructure are critical to our
reputation and our ability to attract and retain large numbers of users. Our
revenues depend on the number of items listed by users, the volume of user
auctions that are successfully completed and the final prices paid for the
items listed. If the volume of traffic on our website or the number of auctions
being conducted by customers continues to increase, we will need to expand and
upgrade our technology, transaction processing systems and network
infrastructure. We may be unable to accurately project the rate or timing of
increases, if any, in the use of our service or to timely expand and upgrade
our systems and infrastructure to accommodate any increases.
We use internally developed systems to operate our service and for
transaction processing, including billing and collections processing. We must
continually improve these systems in order to accommodate the level of use of
our website. In addition, we may add new features and functionality to our
services that would result in the need to develop or license additional
technologies. Our inability to add additional software and hardware or to
upgrade our technology, transaction processing systems or network
infrastructure to accommodate increased traffic or transaction volume could
have adverse consequences. These consequences include unanticipated system
disruptions, slower response times, degradation in levels of customer support,
impaired quality of the users' experience on our service and delays in
reporting accurate financial information. Our failure to provide new features
or functionality also could result in these consequences. We may be unable to
effectively upgrade and expand our systems in a timely manner or to integrate
smoothly any newly developed or purchased technologies with our existing
systems. These difficulties could harm or limit our ability to expand our
business.
System failures could harm our business
We have experienced system failures from time to time. Our website has been
interrupted for periods of up to 22 hours. In addition to placing increased
burdens on our engineering staff, these outages create a flood of user
questions and complaints that must be responded to by our customer support
personnel. Any unscheduled interruption in our service results in an immediate
loss of revenues that can be substantial and may cause some users to switch to
our competitors. If we experience frequent or persistent system failures, our
reputation and brand could be permanently harmed. We are currently taking steps
to increase the reliability and redundancy of our system. These steps are
expensive and may not be successful in reducing the frequency or duration of
unscheduled downtime.
Substantially all of our computer hardware for operating our service
currently is located at the facilities of Exodus Communications, Inc. in Santa
Clara, California and AboveNet in San Jose, California. These systems and
operations are vulnerable to damage or interruption from earthquakes, floods,
fires, power loss, telecommunication failures and similar events. They are also
subject to break-ins, sabotage, intentional acts of vandalism and similar
misconduct. We do not have fully redundant systems, a formal disaster recovery
plan or alternative providers of hosting services, and we do not carry business
interruption insurance to compensate us for losses that may occur. Despite any
precautions we may take, the occurrence of a natural disaster or other
unanticipated problems at either the Exodus or AboveNet facility could result
in interruptions in our services.
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In addition, the failure by Exodus or AboveNet to provide our required data
communications capacity could result in interruptions in our service. Any
damage to or failure of our systems could result in interruptions in our
service. Interruptions in our service will reduce our revenues and profits, and
our future revenues and profits will be harmed if our users believe that our
system is unreliable.
Unauthorized break-ins to our service could harm our business
Our servers are vulnerable to computer viruses, physical or electronic
break-ins and similar disruptions, which could lead to interruptions, delays,
loss of data or the inability to complete customer auctions. In addition,
unauthorized persons may improperly access our data. We have experienced an
unauthorized break-in by a "hacker" who has stated that he can in the future
damage or change our system or take confidential information. We have also
experienced other types of attacks on our system. Any actions like these could
harm us. Actions like these may be very expensive to remedy and could damage
our reputation and discourage new and existing users from using our service.
Our business may be harmed by the listing or sale by our users of illegal items
The law relating to the liability of providers of online services for the
activities of their users on their service is currently unsettled. We are aware
that certain goods, such as firearms, other weapons, adult material, tobacco
products, alcohol and other goods that may be subject to regulation by local,
state or federal authorities, have been listed and traded on our service. We
may be unable to prevent the sale of unlawful goods, or the sale of goods in an
unlawful manner, by users of our service, and we may be subject to allegations
of civil or criminal liability for unlawful activities carried out by users
through our service. In order to reduce our exposure to this liability, we have
prohibited the listing of certain items and increased the number of personnel
reviewing questionable items. We may in the future implement other protective
measures that could require us to spend substantial resources and/or to reduce
revenues by discontinuing certain service offerings. Any costs incurred as a
result of liability or asserted liability relating to the sale of unlawful
goods or the unlawful sale of goods, could harm our business. In addition, we
have received significant and continuing media attention relating to the
listing or sale of unlawful goods on our website. A continuation of this
negative publicity could damage our reputation and diminish the value of our
brand name. It also could make users reluctant to continue to use our services.
Our business may be harmed by the listing or sale by our users of pirated items
We have received in the past, and we anticipate we will receive in the
future, communications alleging that certain items listed or sold through our
service by our users infringe third-party copyrights, trademarks and tradenames
or other intellectual property rights. Although we have actively sought to work
with the content community to eliminate infringing listings on our website,
some content owners have expressed the view that our efforts are insufficient.
An allegation of infringement of third-party intellectual property rights may
result in litigation against us. Any such litigation could be costly for us,
could result in increased costs of doing business through adverse judgment or
settlement, could require us to change our business practices in expensive
ways, or could otherwise harm our business.
Our business may be harmed by fraudulent activities on our website
Our future success will depend largely upon sellers reliably delivering and
accurately representing their listed goods and buyers paying the agreed
purchase price. We have received in the past, and anticipate that we will
receive in the future, communications from users who did not receive the
purchase price or the goods that were to have been exchanged. While we can
suspend the accounts of users who fail to fulfill their delivery obligations to
other users, we do not have the ability to require users to make payments or
deliver goods or otherwise make users whole other than through our limited
insurance program. Other than through this program, we do not compensate users
who believe they have been defrauded by other users. We also
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periodically receive complaints from buyers as to the quality of the goods
purchased. Negative publicity generated as a result of fraudulent or deceptive
conduct by users of our service could damage our reputation and diminish the
value of our brand name. We expect to continue to receive requests from users
requesting reimbursement or threatening legal action against us if no
reimbursement is made. This sort of litigation could be costly for us, divert
management attention, result in increased costs of doing business, lead to
adverse judgments or could otherwise harm our business.
Government inquiries may lead to charges or penalties
On January 29, 1999, we received requests to produce certain records and
information to the federal government relating to an investigation of possible
illegal transactions in connection with our website. We have been informed that
the inquiry includes an examination of our practices with respect to these
transactions. We have provided further information in connection with this
ongoing inquiry. In order to protect the investigation, the court has ordered
that no further public disclosures be made with respect to the matter. Should
this or any other investigation lead to civil or criminal charges against us,
we would likely be harmed by negative publicity, the costs of litigation, the
diversion of management time and other negative effects, even if we ultimately
prevail. Our business would certainly suffer if we were not to prevail in any
action like this. Even the process of providing records and information can be
expensive, time consuming and result in the diversion of management attention.
A large number of transactions occur on our website. As a result, we believe
that government regulators have received a substantial number of consumer
complaints about us which, while small as a percentage of our total
transactions, are large in aggregate numbers. As a result, we have from time to
time been contacted by various federal, state and local regulatory agencies and
been told that they have questions with respect to the adequacy of the steps we
take to protect our users from fraud. For example, the City of New York --
Department of Consumer Affairs received complaints from users about
transactions on our website. In investigating these complaints, the Department
of Consumer Affairs requested information about us and these transactions. We
have provided the requested information. We are likely to receive additional
inquiries from regulatory agencies in the future, which may lead to action
against us. We have responded to all inquiries from regulatory agencies by
describing our current and planned antifraud efforts. If one or more of these
agencies is not satisfied with our response to current or future inquiries, the
resultant investigations and potential fines or other penalties could harm our
business.
Some of our businesses are subject to regulation and others may be in the
future
Both B&B and Kruse are subject to regulation in some jurisdictions governing
the manner in which live auctions are conducted. Both are required to obtain
licensure in these jurisdictions with respect to their business or to permit
the sale of categories of items (e.g. wine, automobiles, real estate). These
licenses generally must be renewed regularly and are subject to revocation for
violation of law, violation of the regulations governing auctions in general or
the sale of the particular item and other events. If either company was unable
to renew a license or had a license revoked, its business would be harmed. In
addition, changes to the regulations or the licensure requirements could
increase the complexity and the cost of doing auctions, thereby harming us.
As our activities and the types of goods listed on our site expand, state
regulatory agencies may claim that we are subject to licensure in their
jurisdiction. These claims could result in costly litigation or could require
us to change our manner of doing business in ways that increase our costs or
reduce our revenues or force us to prohibit listings of certain items. We could
also be subject to fines or other penalties. Any of these outcomes could harm
us. Furthermore, businesses that handle consumers' funds are potentially
subject to numerous regulations, including those related to banking, credit
cards, escrow, fair credit reporting and others. Billpoint is a new business
with a relatively novel approach to facilitating payments. It is not yet known
how regulatory agencies will treat Billpoint. The cost and complexity of
Billpoint's business may increase if certain regulations are deemed to apply to
its business.
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We are subject to risks associated with information disseminated through our
service
The law relating to the liability of online services companies for
information carried on or disseminated through their services is currently
unsettled. Claims could be made against online services companies under both
United States and foreign law for defamation, libel, invasion of privacy,
negligence, copyright or trademark infringement, or other theories based on the
nature and content of the materials disseminated through their services.
Several private lawsuits seeking to impose liability upon online services
companies currently are pending. In addition, federal, state and foreign
legislation has been proposed that imposes liability for or prohibits the
transmission over the Internet of certain types of information. Our service
features a Feedback Forum, which includes information from users regarding
other users. Although all such feedback is generated by users and not by us, it
is possible that a claim of defamation or other injury could be made against us
for content posted in the Feedback Forum. Claims like these become more likely
and have a higher probability of success as we expand internationally. If we
become liable for information provided by our users and carried on our service,
we could be directly harmed and we may be forced to implement new measures to
reduce our exposure to this liability. This may require us to expend
substantial resources and/or to discontinue certain service offerings. In
addition, the increased attention focused upon liability issues as a result of
these lawsuits and legislative proposals could harm our reputation or otherwise
impact the growth of our business. We carry liability insurance, but it may not
be adequate to fully compensate us if we become liable for information carried
on or through our service. Any costs incurred as a result of this liability or
asserted liability could harm our business.
We are subject to intellectual property litigation
On March 23, 1999, we were sued by Network Engineering Software, Inc. in the
U.S. District Court for the Northern District of California for our alleged
willful and deliberate violation of a patent. The suit seeks unspecified
monetary damages as well as an injunction against our operations. It also seeks
treble damages and attorneys' fees and costs. We have answered, denying these
allegations and alleging that the patent is invalid. Discovery has commenced
and we have filed a summary judgment motion seeking to invalidate certain
claims in the patent. We believe that we have meritorious defenses against this
suit and intend to vigorously defend ourselves. We have and will incur material
expenses during this defense and in the event we were to lose this suit, our
business would be harmed.
On September 1, 1999, we were served with a lawsuit filed by Randall Stoner,
on behalf of the general public, in San Francisco Superior Court (No. 305666).
The lawsuit alleges that we violated Section 17200 of the California Business &
Professions Code, a statute that relates to unfair competition, based upon the
listing of "bootleg" or "pirate" recordings by our users, allegedly in
violation of California penal statutes relating to the sale of unauthorized
audio recordings. The lawsuit seeks declaratory and injunctive relief,
restitution and legal fees. We have filed a general demurrer which was
sustained by the court with leave to amend. The plaintiff has filed an amended
complaint. Discovery has commenced, and we have again filed a general demurrer.
We believe we have meritorious defenses to this lawsuit and intend to defend
ourselves vigorously. However, even if successful, this defense could be costly
and, if we were to lose this lawsuit, our business could be harmed.
Other third parties have from time to time claimed and may claim in the
future that we have infringed their past, current or future technologies. We
expect that participants in our markets increasingly will be subject to
infringement claims as the number of services and competitors in our industry
segment grows. Any claim like this, whether meritorious or not, could be time-
consuming, result in costly litigation, cause service upgrade delays or require
us to enter into royalty or licensing agreements. These royalty or licensing
agreements might not be available on acceptable terms or at all. As a result,
any claim like this could harm our business.
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Our stock price has been and may continue to be extremely volatile
The trading price of our common stock has been and is likely to be extremely
volatile. Our stock price could be subject to wide fluctuations in response to
a variety of factors, including the following:
. actual or anticipated variations in our quarterly operating results;
. unscheduled system downtime;
. additions or departures of key personnel;
. announcements of technological innovations or new services by us or our
competitors;
. changes in financial estimates by securities analysts;
. conditions or trends in the Internet and online commerce industries;
. changes in the market valuations of other Internet or online service
companies;
. developments in Internet regulations;
. announcements by us or our competitors of significant acquisitions,
strategic partnerships, joint ventures or capital commitments;
. sales of our common stock or other securities in the open market; and
. other events or factors that may be beyond our control.
In addition, the trading price of Internet stocks in general, and ours in
particular, have experienced extreme price and volume fluctuations in recent
months. These fluctuations often have been unrelated or disproportionate to the
operating performance of these companies. The valuations of many Internet
stocks, including ours, are extraordinarily high based on conventional
valuation standards such as price to earnings and price to sales ratios. The
trading price of our common stock has increased enormously from the initial
public offering price. These trading prices and valuations may not be
sustained. Any negative change in the public's perception of the prospects of
Internet or e-commerce companies could depress our stock price regardless of
our results. Other broad market and industry factors may decrease the market
price of our common stock, regardless of our operating performance. Market
fluctuations, as well as general political and economic conditions such as
recession or interest rate or currency rate fluctuations, also may decrease the
market price of our common stock. In the past, following declines in the market
price of a company's securities, securities class-action litigation often has
been instituted against the company. Litigation of this type, if instituted,
could result in substantial costs and a diversion of management's attention and
resources.
New and existing regulations could harm our business
We are subject to the same federal, state and local laws as other companies
conducting business on the Internet. Today there are relatively few laws
specifically directed towards online services. However, due to the increasing
popularity and use of the Internet and online services, it is possible that
laws and regulations will be adopted with respect to the Internet or online
services. These laws and regulations could cover issues such as online
contracts, user privacy, freedom of expression, pricing, fraud, content and
quality of products and services, taxation, advertising, intellectual property
rights and information security. Applicability to the Internet of existing laws
governing issues such as property ownership, copyrights and other intellectual
property issues, taxation, libel, obscenity and personal privacy is uncertain.
The vast majority of these laws were adopted prior to the advent of the
Internet and related technologies and, as a result, do not contemplate or
address the unique issues of the Internet and related technologies. Those laws
that do reference the Internet, such as the recently passed Digital Millennium
Copyright Act, have not yet been interpreted by the courts and their
applicability and reach are therefore uncertain. In addition, numerous states,
including the State of California, where our headquarters are located, have
regulations regarding how "auctions" may be conducted and the liability of
"auctioneers" in conducting such auctions. No legal determination has been made
with respect to the
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applicability of the California regulations to our business to date and little
precedent exists in this area. Several states are considering imposing these
regulations upon us or our users, which could harm our business. In addition,
as the nature of the products listed by our users changes, we may become
subject to new regulatory restrictions.
Several states have proposed legislation that would limit the uses of
personal user information gathered online or require online services to
establish privacy policies. The Federal Trade Commission also has recently
settled a proceeding with one online service regarding the manner in which
personal information is collected from users and provided to third parties.
Changes to existing laws or the passage of new laws intended to address these
issues could directly affect the way we do business or could create uncertainty
in the marketplace. This could reduce demand for our services, increase the
cost of doing business as a result of litigation costs or increased service
delivery costs, or otherwise harm our business. In addition, because our
services are accessible worldwide, and we facilitate sales of goods to users
worldwide, foreign jurisdictions may claim that we are required to comply with
their laws. As we expand our international activities, we will become obligated
to comply with these laws. Compliance may be more costly or may require us to
change our business practices or restrict our service offerings relative to
those in the United States. Our failure to comply with foreign laws could
subject us to penalties ranging from fines to bans on our ability to offer our
services.
In the United States, companies are required to qualify as foreign
corporations in states where they are conducting business. As an Internet
company, it is unclear in which states we are actually conducting business. Our
failure to qualify as a foreign corporation in a jurisdiction where we are
required to do so could subject us to taxes and penalties for the failure to
qualify and could result in our inability to enforce contracts in those
jurisdictions. Any new legislation or regulation, or the application of laws or
regulations from jurisdictions whose laws do not currently apply to our
business, could harm our business.
Our business has been seasonal
Our results of operations historically have been somewhat seasonal in nature
because many of our users reduce their activities on our website during the
Thanksgiving and Christmas holidays and with the onset of good weather. Both
B&B and Kruse have significant quarter to quarter variations in their results
depending on the timing of auctions and the availability of high quality items
from large collections and estates. B&B typically has its best operating
results in the traditional fall and spring auction seasons and has historically
incurred operating losses in the first and third quarters. Kruse typically sees
a seasonal peak in operations in the third quarter. Seasonal or cyclical
variations in our business may become more pronounced over time and may harm
our results of operations in the future.
We are dependent on the continued growth of the online person-to-person
commerce market
The market for the sale of goods over the Internet, particularly through
person-to-person trading, is a new and emerging market. Our future net revenues
and profits will be substantially dependent upon the widespread acceptance of
the Internet and online services as a medium for commerce by consumers. Rapid
growth in the use of and interest in the Web, the Internet and online services
is a recent phenomenon. This acceptance and use may not continue. Even if the
Internet is accepted, concerns about fraud, privacy and other problems may mean
that a sufficiently broad base of consumers will not adopt the Internet as a
medium of commerce. In particular, our website requires users to make publicly
available their e-mail addresses and other personal information that some
potential users may be unwilling to provide. These concerns may increase as
additional publicity over privacy issues on eBay or generally over the Internet
increase. Market acceptance for recently introduced services and products over
the Internet is highly uncertain, and there are few proven services and
products. In order to expand our user base, we must appeal to and acquire
consumers who historically have used traditional means of commerce to purchase
goods.
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There are many risks associated with international operations
We are expanding internationally. We recently acquired alando, a leading
German person-to-person trading company. Expansion into international markets
will require management attention and resources. We have limited experience in
localizing our service to conform to local cultures, standards and policies. We
may have to compete with local companies who understand the local market better
than we do. We may not be successful in expanding into international markets or
in generating revenues from foreign operations. Even if we are successful, the
costs of operating internationally are expected to exceed our international net
revenues for at least 12 months in most countries. As we continue to expand
internationally, we are subject to risks of doing business internationally,
including the following:
. regulatory requirements, including regulation of "auctions," that may
limit or prevent the offering of our services in local jurisdictions;
. legal uncertainty regarding liability for the listings of our users,
including less Internet friendly basic law and unique local laws;
. government-imposed limitations on the public's access to the Internet;
. difficulties in staffing and managing foreign operations;
. longer payment cycles, different accounting practices and problems in
collecting accounts receivable;
. cultural nonacceptance of online auctions;
. more stringent consumer protection laws;
. seasonal reductions in business activity; and
. potentially adverse tax consequences.
Some of these factors may cause our international costs to exceed our
domestic costs of doing business. To the extent we expand our international
operations and have additional portions of our international revenues
denominated in foreign currencies, we also could become subject to increased
difficulties in collecting accounts receivable and risks relating to foreign
currency exchange rate fluctuations.
Our business may be subject to sales and other taxes
We do not collect sales or other similar taxes on goods sold by users
through our service. One or more states may seek to impose sales tax collection
obligations on companies such as ours that engage in or facilitate online
commerce. Several proposals have been made at the state and local level that
would impose additional taxes on the sale of goods and services through the
Internet. These proposals, if adopted, could substantially impair the growth of
electronic commerce, and could diminish our opportunity to derive financial
benefit from our activities. In 1998, the U.S. federal government enacted
legislation prohibiting states or other local authorities from imposing new
taxes on Internet commerce for a period of three years. This tax moratorium
will last only for a limited period and does not prohibit states or the
Internal Revenue Service from collecting taxes on our income, if any, or from
collecting taxes that are due under existing tax rules. A successful assertion
by one or more states or any foreign country that we should collect sales or
other taxes on the exchange of merchandise on our system would harm our
business.
We are dependent on key personnel
Our future performance will be substantially dependent on the continued
services of our senior management and other key personnel. Our future
performance also will depend on our ability to retain and motivate our other
officers and key employees. The loss of the services of any of our executive
officers or other key employees could harm our business. We do not have long-
term employment agreements with any of our key personnel and we do not maintain
any "key person" life insurance policies. Our new businesses are all
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dependent on attracting and retaining key employees. The land-based auction
businesses are particularly dependent on specialists and senior management
because of the relationships these individuals have established with sellers
who consign property for sale at auction. Dean Kruse is particularly important
to Kruse. We have had some turnover of these types of personnel, and continued
losses could result in the loss of significant future business and would harm
us. Such personnel are in great demand by other auction companies. In addition,
employee turnover frequently increases during the period following an
acquisition as employees evaluate possible changes in compensation, culture,
reporting relationships, and the direction of the business. Such increased
turnover could increase our costs and reduce our future revenues. Our future
success also will depend on our ability to attract, train, retain and motivate
highly skilled technical, managerial, marketing and customer support personnel.
Competition for these personnel is intense, especially for engineers and
especially in the San Francisco Bay Area, and we may be unable to successfully
attract, integrate or retain sufficiently qualified personnel. In making
employment decisions, particularly in the Internet and high-technology
industries, job candidates often consider the value of the stock options they
are to receive in connection with their employment. Fluctuations in our stock
price may make it more difficult to retain and motivate employees whose stock
option strike prices are substantially above current market prices.
Our new land-based auction businesses need to continue to acquire properties
The businesses of B&B and Kruse are both dependent on the continued
acquisition of high quality auction properties from sellers. Their future
success will depend in part on their ability to maintain an adequate supply of
high quality auction property, particularly fine and decorative arts and
collectibles and collectible automobiles, respectively. There is intense
competition for these pieces with other auction companies and dealers. In
addition, a small number of key senior management and specialists maintain the
relationships with the primary sources of auction property and the loss of any
of these individuals could harm the business of B&B and Kruse.
Our new land-based auction businesses could suffer losses from price
guarantees, advances or rescissions of sales
In order to secure high quality auction properties from sellers, B&B and
Kruse may give a guaranteed minimum price or a cash advance to a seller, based
on the estimated value of the property. If the auction proceeds are less than
the amount guaranteed, or less than the amount advanced and the seller does not
repay the difference, the company involved will suffer a loss. In addition,
under certain circumstances a buyer who believes that an item purchased at
auction does not have good title, provenance or authenticity may rescind the
purchase. Under these circumstances, the company involved will lose its
commissions and fees on the sale even if the seller, in accordance with the
terms and conditions of sale, in turn accepts back the item and returns the
funds he or she received from the sale.
We acquired real property with some of our new businesses
In connection with the acquisition of Kruse and B&B we acquired real
property including land, buildings and interests in partnerships holding land
and buildings. We have no experience in managing real property. Ownership of
this property subjects us to new risks, including:
. the possibility of environmental contamination and the costs associated
with fixing any environmental problems;
. the possible need for structural improvements in order to comply with
zoning, seismic, disability act or other requirements; and
. possible disputes with tenants, partners or others.
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Our market is intensely competitive
The market for person-to-person trading over the Internet is new, rapidly
evolving and intensely competitive, and we expect competition to intensify in
the future. Barriers to entry are relatively low, and current and new
competitors can launch new sites at a relatively low cost using commercially
available software. We currently or potentially compete with a number of other
companies. Our direct competitors include various online person-to-person
auction services, including Yahoo! Auctions, Amazon.com, the Fairmarket Auction
Network, Disney/Infoseek and a large number of other services. We currently
believe that more than 500 companies are using an auction format for consumer-
to-consumer or business-to-consumer sales. In mid-September, Fairmarket, a
provider of auction software and services, announced that it had assembled an
auction network including Microsoft's MSN, Excite@Home, Dell Computer, ZD Net,
Lycos and more than 100 others. Listings from all of these companies would be
aggregated and available at each member's site. We also compete indirectly with
business-to-consumer online auction services such as Onsale, First Auction,
Surplus Auction and uBid. Traditional auction companies such as Sotheby's are
offering or have announced plans to create Internet auction sites. We
potentially face competition from a number of large online communities and
services that have expertise in developing online commerce and in facilitating
online person-to-person interaction. Other large companies with strong brand
recognition and experience in online commerce, such as Cendant Corporation,
QVC, USA Network and large newspaper or media companies, also may seek to
compete in the online auction market. Finally, some companies are "aggregating"
our auction listings with those of our competitors thereby indirectly competing
with us.
The principal competitive factors in our market include the following:
. volume of transactions and selection of goods;
. community cohesion and interaction;
. system reliability;
. customer service;
. reliability of delivery and payment by users;
. brand recognition;
. website convenience and accessibility;
. level of service fees; and
. quality of search tools.
Some current and potential competitors have longer company operating
histories, larger customer bases and greater brand recognition in other
business and Internet markets than we do. Some of these competitors also have
significantly greater financial, marketing, technical and other resources.
Other online trading services may be acquired by, receive investments from or
enter into other commercial relationships with larger, well established and
well financed companies. As a result, some of our competitors with other
revenue sources may be able to devote more resources to marketing and
promotional campaigns, adopt more aggressive pricing policies and devote
substantially more resources to website and systems development than we are
able to. Increased competition may result in reduced operating margins, loss of
market share and diminished value of our brand. Some of our competitors have
offered services for free and others may do this as well. We may be unable to
compete successfully against current and future competitors.
In order to respond to changes in the competitive environment, we may, from
time to time, make pricing, service or marketing decisions or acquisitions that
could harm our business. For example, we implemented an insurance program that
generally insures items up to a value of $200, with a $25 deductible, for users
with a non-negative feedback rating at no cost to the user. The financial
impact of this insurance program is not yet known. New technologies may
increase the competitive pressures by enabling our competitors to offer a lower
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cost service. Some Web-based applications that direct Internet traffic to
certain websites may channel users to trading services that compete with us.
Although we have established Internet traffic arrangements with several
large online services and search engine companies, these arrangements may not
be renewed on commercially reasonable terms. Even if these arrangements are
renewed, they may not result in increased usage of our service. In addition,
companies that control access to transactions through network access or Web
browsers could promote our competitors or charge us substantial fees for
inclusion.
The land-based auction business is intensely competitive. B&B competes with
two larger and better known auction companies, Sotheby's Holdings, Inc. and
Christie's International plc, as well as numerous regional auction companies.
To the extent that these companies increase their focus on the middle market
properties that form the core of B&B's business, its business may suffer. Kruse
is subject to competition from numerous regional competitors. In addition,
competition with Internet based auctions may harm the land-based auction
business. Although Billpoint's business is new, several companies are beginning
to enter this market and large competitors, including banks and credit card
companies, may become competitors.
Our business is dependent on the development and maintenance of the Web
infrastructure
The success of our service will depend largely on the development and
maintenance of the Web infrastructure. This includes maintenance of a reliable
network backbone with the necessary speed, data capacity and security, as well
timely development of complementary products such as high speed modems, for
providing reliable Web access and services. Because global commerce and the
online exchange of information is new and evolving, we cannot predict whether
the Web will prove to be a viable commercial marketplace in the long term. The
Web has experienced, and is likely to continue to experience, significant
growth in the numbers of users and amount of traffic. If the Web continues to
experience increased numbers of users, increased frequency of use or increased
bandwidth requirements, the Web infrastructure may be unable to support the
demands placed on it. In addition, the performance of the Web may be harmed by
increased users or bandwidth requirements.
The Web has experienced a variety of outages and other delays as a result of
damage to portions of its infrastructure, and it could face outages and delays
in the future. This might include outages and delays resulting from the "Year
2000" problem. These outages and delays could reduce the level of Web usage as
well as the level of traffic and the processing of auctions on our service. In
addition, the Web could lose its viability due to delays in the development or
adoption of new standards and protocols to handle increased levels of activity
or due to increased governmental regulation. The infrastructure and
complementary products or services necessary to make the Web a viable
commercial marketplace for the long term may not be developed successfully or
in a timely manner. Even if these products or services are developed, the Web
may not become a viable commercial marketplace for services such as those that
we offer.
Our business could be harmed by Year 2000 compliance issues
Many currently installed computer systems and software products are coded to
accept only two-digit entries in the date code field and cannot reliably
distinguish dates beginning on January 1, 2000 from dates prior to the year
2000. Many companies' software and computer systems may need to be upgraded or
replaced in order to correctly process dates beginning in 2000 and to comply
with the "Year 2000" requirements. We have reviewed our internal programs and
have determined that there are no significant Year 2000 issues within our
mission critical systems or services. We are engaged in a testing program to
further ensure Year 2000 compliance. We have completed initial testing of our
system. We have made modifications to our internal systems to fix identified
Year 2000 issues in an attempt to ensure Year 2000 compliance. The costs of
these modifications have not been material and have involved a reallocation of
internal resources rather than incremental expenditures. We will continue to
test new and modified software through the end of the year. This program may
identify additional modifications to our internal systems which will need to be
made prior to the
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end of December. If any such modifications are not made, or if problems exist
that are not identified, we could face unexpected expenses to fix the problem
or unanticipated website outages, either of which would harm our business. We
use third-party equipment and software that may not be Year 2000 compliant.
Following a website outage in June 1999, we undertook a comprehensive site
review including a further review of our website for Year 2000 compliance. This
review and follow-on reviews identified certain software "patches" for third
party software that needed to be implemented for Year 2000 compliance. The
process of implementing these patches has been substantially completed. The
cost of this implementation has not been material and has been accomplished
through a reallocation of internal resources.
In connection with our acquisitions of each of our newly acquired
businesses, we received representations and warranties that the systems and
software of these businesses are Year 2000 compliant. We have reviewed the Year
2000 status of the software and systems of our newly acquired businesses and
believe them to be Year 2000 compliant. We currently expect the cost of our
Year 2000 reviews, testing and modifications will not exceed $1,500,000. We may
be harmed if necessary upgrades or changes are not identified, or if identified
are not timely and successfully implemented at an acceptable cost. We also may
be harmed by Year 2000 problems at our vendors and business partners. For
example, we rely on credit card companies to collect the majority of our
revenues from users. Failure of our credit card vendors or other third-party
equipment or software vendors to properly process dates for the year 2000 and
thereafter could require us to incur unanticipated expenses in seeking
alternative means of payment or hardware or software replacements. It also
could result in loss of revenues or unanticipated eBay website outages. Our
marketing efforts are also dependent on the continued operation of Internet
portals and other Internet sites on which we advertise.
Although we have developed contingency plans with respect to many Year 2000
contingencies, we are unable to make contingency plans if any significant
number of the computers constituting the Internet fail to process dates
properly for the year 2000 and there is a systemwide slowdown or breakdown. Our
business is dependent on the continued successful operation of the Internet.
Any interruption or significant degradation of Internet operations due to Year
2000 problems could harm our business.
Our business is subject to online commerce security risks
A significant barrier to online commerce and communications is the secure
transmission of confidential information over public networks. Our security
measures may not prevent security breaches. Our failure to prevent security
breaches could harm our business. Currently, a significant number of our users
authorize us to bill their credit card accounts directly for all transaction
fees charged by us. We rely on encryption and authentication technology
licensed from third parties to provide the security and authentication
technology to effect secure transmission of confidential information, including
customer credit card numbers. Advances in computer capabilities, new
discoveries in the field of cryptography, or other developments may result in a
compromise or breach of the technology used by us to protect customer
transaction data. Any such compromise of our security could harm our reputation
and, therefore, our business. In addition, a party who is able to circumvent
our security measures could misappropriate proprietary information or cause
interruptions in our operations. An individual has claimed to have
misappropriated some of our confidential information by breaking into our
computer system. We may need to expend significant resources to protect against
security breaches or to address problems caused by breaches. Security breaches
could damage our reputation and expose us to a risk of loss or litigation and
possible liability. Our insurance policies carry low coverage limits, which may
not be adequate to reimburse us for losses caused by security breaches.
We must keep pace with rapid technological change to remain competitive
The market in which we compete is characterized by rapidly changing
technology, evolving industry standards, frequent new service and product
introductions and enhancements and changing customer demands. These market
characteristics are worsened by the emerging nature of the Internet and the
apparent need of companies from a multitude of industries to offer Web-based
products and services. Our future success
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therefore will depend on our ability to adapt to rapidly changing technologies,
to adapt our services to evolving industry standards and to continually improve
the performance, features and reliability of our service. Our failure to adapt
to such changes would harm our business. In addition, the widespread adoption
of new Internet, networking or telecommunications technologies or other
technological changes could require substantial expenditures to modify or adapt
our services or infrastructure.
We need to develop new services, features and functions in order to expand
We plan to expand our operations by developing new or complementary
services, products or transaction formats or expanding the breadth and depth of
services. We may be unable to expand our operations in a cost-effective or
timely manner. Even if we do expand, we may not maintain or increase our
overall market acceptance. If we launch a new business or service that is not
favorably received by consumers, it could damage our reputation and diminish
the value of our brand. We anticipate that future services may include pre-and
post-trade services, including the following:
. the scanning and uploading of photographs of listed items;
. authentication and appraisal; and
. arrangements to facilitate shipment of products.
We may pursue strategic relationships with third parties to provide many of
these services. By using third parties to deliver these services, we may be
unable to control the quality of these services and our ability to address
problems if any of these third parties fails to perform adequately will be
reduced. Expanding our operations in this manner also will require significant
additional expenses and development, operations and other resources and will
strain our management, financial and operational resources. The lack of market
acceptance of any new services could harm our business.
Our growth will depend on our ability to develop our brand
We believe that our historical growth has been largely attributable to word
of mouth. We have benefited from frequent and high visibility media exposure
both nationally and locally. We do not expect the frequency or quality of this
media exposure to continue. However, we believe that continuing to strengthen
our brand will be critical to achieving widespread acceptance of our service.
Promoting and positioning our brand will depend largely on the success of our
marketing efforts and our ability to provide high quality services. In order to
promote our brand, we will need to increase our marketing budget and otherwise
increase our financial commitment to creating and maintaining brand loyalty
among users. Brand promotion activities may not yield increased revenues, and
even if they do, any increased revenues may not offset the expenses we incurred
in building our brand. If we do attract new users to our service, they may not
conduct transactions over our service on a regular basis. If we fail to promote
and maintain our brand or incur substantial expenses in an unsuccessful attempt
to promote and maintain our brand, our business would be harmed.
We may be unable to protect or enforce our intellectual property rights
adequately
We regard the protection of our copyrights, service marks, trademarks, trade
dress and trade secrets as critical to our success. We rely on a combination of
patent, copyright, trademark, service mark and trade secret laws and
contractual restrictions to protect our proprietary rights in products and
services. We have entered into confidentiality and invention assignment
agreements with our employees and contractors, and nondisclosure agreements
with parties with which we conduct business in order to limit access to and
disclosure of our proprietary information. These contractual arrangements and
the other steps taken by us to protect our intellectual property may not
prevent misappropriation of our technology or deter independent third-party
development of similar technologies. We pursue the registration of our
trademarks and service marks in the U.S. and internationally. Effective
trademark, service mark, copyright and trade secret protection may not be
available in every country in which our services are made available online. We
have licensed in the past, and
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expect to license in the future, certain of our proprietary rights, such as
trademarks or copyrighted material, to third parties. These licensees may take
actions that might diminish the value of our proprietary rights or harm our
reputation. We also rely on certain technologies that we license from third
parties, such as Oracle Corporation, Microsoft and Sun Microsystems Inc., the
suppliers of key database technology, the operating system and specific
hardware components for our service. These third-party technology licenses may
not continue to be available to us on commercially reasonable terms. The loss
of this technology could require us to obtain substitute technology of lower
quality or performance standards or at greater cost.
Our business is subject to consumer trends and discretionary consumer spending
We derive most of our revenues from fees received from sellers for listing
products for sale on our service and fees received from successfully completed
auctions. Our future revenues will depend upon continued demand for the types
of goods that are listed by users of our service. The popularity of certain
categories of items, such as toys, dolls and memorabilia, among consumers may
vary over time due to perceived scarcity, subjective value, and societal and
consumer trends in general. A decline in the popularity of, or demand for,
certain collectibles or other items sold through our service could reduce the
overall volume of transactions on our service, resulting in reduced revenues.
In addition, consumer "fads" may temporarily inflate the volume of certain
types of items listed on our service, placing a significant strain upon our
infrastructure and transaction capacity. These trends also may cause
significant fluctuations in our operating results from one quarter to the next.
Any decline in demand for the goods offered through our service as a result of
changes in consumer trends could harm our business. A decline in consumer
spending would harm our land-based auction businesses. Sales of fine and
decorative art, collectable cars and other collectibles would be adversely
affected by a decline in discretionary consumer spending, especially for luxury
items. Changes in buyer's tastes, economic conditions or consumer trends could
cause declines in the number or dollar volume of items auctioned and thereby
harm the business of these companies.
Some anti-takeover provisions may affect the price of our common stock
The Board of Directors has the authority to issue up to 10,000,000 shares of
preferred stock and to determine the preferences, rights and privileges of
those shares without any further vote or action by the stockholders. The rights
of the holders of common stock may be harmed by the rights of the holders of
any preferred stock that may be issued in the future. Some provisions of our
certificate of incorporation and bylaws could have the effect of making it more
difficult for a third party to acquire a majority of our outstanding voting
stock. These include provisions that provide for a classified Board of
Directors, prohibit stockholders from taking action by written consent and
restrict the ability of stockholders to call special meetings. We are also
subject to provisions of Delaware law that prohibit us from engaging in any
business combination with any interested stockholder for a period of three
years from the date the person became an interested stockholder, unless certain
conditions are met. This could have the effect of delaying or preventing a
change of control.
We are controlled by certain stockholders, executive officers and directors
Our executive officers and directors (and their affiliates) own more than
60% of our outstanding common stock. As a result, they have the ability to
control our company and direct our affairs and business, including the election
of directors and approval of significant corporate transactions. This
concentration of ownership may have the effect of delaying, deferring or
preventing a change in control of our company and may make some transactions
more difficult or impossible without the support of these stockholders. Any of
these events could decrease the market price of our common stock.
19
<PAGE>
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares of
common stock offered by the selling stockholders.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We
intend to retain any future earnings to support operations and to finance the
growth and development of our business and we do not anticipate paying cash
dividends for the foreseeable future.
WHERE YOU CAN GET MORE INFORMATION
We are a reporting company and file annual, quarterly and current reports,
proxy statements and other information with the SEC. You may read and copy
these reports, proxy statements and other information at the SEC's public
reference rooms at Room 1024, 450 Fifth Street, N.W., Washington, D.C., as
well as at the SEC's regional offices at 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York, NY
10048. You can request copies of these documents by writing to the SEC and
paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for
more information about the operation of the public reference rooms. Our SEC
filings are also available at the SEC's web site at "http://www.sec.gov." In
addition, you can read and copy our SEC filings at the office of the National
Association of Securities Dealers, Inc. at 1735 "K" Street, Washington, D.C.
20006.
The SEC allows us to "incorporate by reference" information that we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
will make with the SEC under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:
. Annual Report on Form 10-K for the year ended December 31, 1998;
. Quarterly Report on Form 10-Q for the quarter ended March 31, 1999,
filed May 14, 1999;
. Quarterly Report on Form 10-Q for the quarter ended June 30, 1999, filed
August 9, 1999;
. Quarterly Report on Form 10-Q for the quarter ended September 30, 1999,
filed November 15, 1999;
. Current Report on Form 8-K, filed May 28, 1999 and amended on Form 8-
K/A, filed July 26, 1999;
. Current Report on Form 8-K, filed June 7, 1999 and amended on Form 8-
K/A, filed July 26, 1999;
. Current Report on Form 8-K, filed September 14, 1999; and
. The description of the common stock contained in our Registration
Statement on Form 8-A, as filed on August 20, 1998 with the SEC.
You may request a copy of these filings at no cost, by writing or
telephoning us at the following address:
eBay Inc.
2125 Hamilton Avenue
San Jose, CA 95125
(408) 558-7400
This prospectus is part of a Registration Statement we filed with the SEC.
You should rely only on the information incorporated by reference or provided
in this prospectus and the Registration Statement. We have authorized no one
to provide you with different information. You should not assume that the
information in this prospectus is accurate as of any date other than the date
on the front of the document.
20
<PAGE>
SELLING STOCKHOLDERS
In connection with our acquisition of B&B in April of 1999, we issued shares
of our common stock to all of the selling stockholders, and we agreed to
register a number of shares of the common stock for resale. We also agreed to
use reasonable efforts to keep the registration statement effective until the
earliest of the date the shares of common stock offered under this prospectus
have been sold to the public, the date one year from the date of effectiveness
of this prospectus (subject to adjustment in certain cases for delays in
filing) and the date when all shares of common stock offered under this
prospectus may be sold in any three month period under Rule 144. Our
registration of the shares of common stock does not necessarily mean that the
selling stockholders will sell all or any of the shares.
The following table sets forth certain information regarding the beneficial
ownership of the common stock, as of December 10, 1999, by each of the selling
stockholders.
The information provided in the table below with respect to each selling
stockholder has been obtained from that selling stockholder. Except as
otherwise disclosed below, none of the selling stockholders has, or within the
past three years has had, any position, office or other material relationship
with us. Because the selling stockholders may sell all or some portion of the
shares of common stock beneficially owned by them, we cannot estimate the
number of shares of common stock that will be beneficially owned by the selling
stockholders after this offering. In addition, the selling stockholders may
have sold, transferred or otherwise disposed of, or may sell, transfer or
otherwise dispose of, at any time or from time to time since the date on which
they provided the information regarding the shares of common stock beneficially
owned by them, all or a portion of the shares of common stock beneficially
owned by them in transactions exempt from the registration requirements of the
Securities Act of 1933.
Beneficial ownership is determined in accordance with Rule 13d-3(d)
promulgated by the Commission under the Securities Exchange Act of 1934. Unless
otherwise noted, each person or group identified possesses sole voting and
investment power with respect to shares, subject to community property laws
where applicable. None of the share amounts set forth below represents more
than 1% of our outstanding stock as of December 10, 1999, adjusted as required
by rules promulgated by the SEC.
<TABLE>
<CAPTION>
Shares
Being
Selling Stockholder Number Offered
- ------------------- ------- -------
<S> <C> <C>
Bernard A. Osher Revocable Trust Dated March 8, 1988.......... 278,580 212,611
Bernard A. Osher Foundation................................... 39,791 39,791
Irving and Varda Rabin, Trustees U/T/A dated 2/26/99, fbo
Irving Rabin Trust........................................... 170,190 115,000
Varda and Irving Rabin, Trustees U/T/A dated 2/26/99, fbo
Varda Rabin Trust............................................ 170,190 115,000
John Gallo.................................................... 27,602 11,731
</TABLE>
21
<PAGE>
PLAN OF DISTRIBUTION
The shares of common stock may be sold from time to time by the selling
stockholders in one or more transactions at fixed prices, at market prices at
the time of sale, at varying prices determined at the time of sale or at
negotiated prices. As used in this prospectus, "selling stockholders" includes
donees, pledgees, transferees and other successors in interest selling shares
received from a selling stockholder after the date of this prospectus as a
gift, pledge, partnership distribution or other non-sale transfer. Upon eBay
being notified by a selling stockholder that a donee, pledgee, transferee or
other successor in interest intends to sell more than 500 shares, a supplement
to this prospectus will be filed. The selling stockholders may offer their
shares of common stock in one or more of the following transactions:
. on any national securities exchange or quotation service on which the
common stock may be listed or quoted at the time of sale, including the
Nasdaq National Market;
. in the over-the-counter market;
. in private transactions;
. through options;
. by pledge to secure debts and other obligations; or
. a combination of any of the above transactions.
If required, we will distribute a supplement to this prospectus to describe
material changes in the terms of the offering.
The shares of common stock described in this prospectus may be sold from
time to time directly by the selling stockholders. Alternatively, the selling
stockholders may from time to time offer shares of common stock to or through
underwriters, broker/dealers or agents. The selling stockholders and any
underwriters, broker/dealers or agents that participate in the distribution of
the shares of common stock may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933. Any profits on the resale of shares of
common stock and any compensation received by any underwriter, broker/dealer or
agent may be deemed to be underwriting discounts and commissions under the
Securities Act of 1933. We have agreed to indemnify each selling stockholder
against certain liabilities, including liabilities arising under the Securities
Act of 1933. The selling stockholders may agree to indemnify any agent, dealer
or broker-dealer that participates in the sale of shares of common stock
described in this prospectus against certain liabilities, including liabilities
arising under the Securities Act of 1933.
Any shares covered by this prospectus that qualify for sale pursuant to Rule
144 under the Securities Act of 1933 may be sold under Rule 144 rather than
pursuant to this prospectus. The selling stockholders may not sell all of the
shares they hold. The selling stockholders may transfer, devise or gift such
shares by other means not described in this prospectus.
To comply with the securities laws of certain jurisdictions, the common
stock must be offered or sold only through registered or licensed brokers or
dealers. In addition, in certain jurisdictions, the shares of common stock may
not be offered or sold unless they have been registered or qualified for sale
or an exemption is available and complied with.
Under the Securities Exchange Act of 1934, any person engaged in a
distribution of the common stock may not simultaneously engage in market-making
activities with respect to the common stock for five business days prior to the
start of the distribution. In addition, each selling stockholder and any other
person participating in a distribution will be subject to the Securities
Exchange Act of 1934, which may limit the timing of purchases and sales of
common stock by the selling stockholders or any such other person. These
factors may affect the marketability of the common stock and the ability of
brokers or dealers to engage in market-making activities.
All expenses of this registration, estimated at approximately $40,000 will
be paid by us. These expenses include the SEC's filing fees and fees under
state securities or "blue sky" laws.
22
<PAGE>
LEGAL MATTERS
For the purpose of this offering, Cooley Godward LLP, San Francisco,
California, is giving an opinion as to the validity of the common stock offered
by this prospectus.
EXPERTS
The financial statements incorporated in this Prospectus by reference to the
Current Report on Form 8-K dated September 14, 1999, for the year ended
December 31, 1998, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
23
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
We have not authorized any dealer, sales person or other person to give any
information or to make any representations other than those contained in this
prospectus or any prospectus supplement. You must not rely on any unauthorized
information. This prospectus is not an offer of these securities in any state
where an offer is not permitted. The information in this prospectus is current
as of , 1999. You should not assume that this prospectus is accurate as of
any other date.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary......................................................... 2
Risk Factors............................................................... 4
Use of Proceeds............................................................ 20
Dividend Policy............................................................ 20
Where You Can Find More Information........................................ 20
Selling Stockholders....................................................... 21
Plan of Distribution....................................................... 22
Legal Matters.............................................................. 23
Experts.................................................................... 23
</TABLE>
494,133 Shares
Common Stock
------------------
PROSPECTUS
------------------
eBAY INC.
, 1999
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, if any, all of which will be paid by
the registrant in connection with the distribution of the common stock being
registered. All amounts are estimated, except the SEC registration fee:
<TABLE>
<S> <C>
SEC registration fee................................................. $19,499
Accounting fees...................................................... 4,000
Legal fees and expenses.............................................. 6,000
Miscellaneous........................................................ 5,501
Printing and engraving............................................... 5,000
-------
Total.............................................................. $40,000
=======
</TABLE>
Item 15. Indemnification of Officers and Directors.
As permitted by Section 145 of the Delaware General Corporation Law, the
Bylaws of the Registrant provide that (i) the Registrant is required to
indemnify its directors and executive officers to the fullest extent permitted
by the Delaware General Corporation Law, (ii) the Registrant may, in its
discretion, indemnify other officers, employees and agents as set forth in the
Delaware General Corporation Law, (iii) to the fullest extent permitted by the
Delaware General Corporation Law, the Registrant is required to advance all
expenses incurred by its directors and executive officers in connection with a
legal proceeding (subject to certain exceptions), (iv) the rights conferred in
the Bylaws are not exclusive, (v) the Registrant is authorized to enter into
indemnification agreements with its directors, officers, employees and agents
and (vi) the Registrant may not retroactively amend the Bylaws provisions
relating to indemnity.
The Registrant has entered into agreements with its directors and executive
officers that require the Registrant to indemnify such persons against
expenses, judgments, fines, settlements and other amounts that such person
becomes legally obligated to pay (including expenses of a derivative action) in
connection with any proceeding, whether actual or threatened, to which any such
person may be made a party by reason of the fact that such person is or was a
director or officer of the Registrant or any of its affiliated enterprises,
provided such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the Registrant. The
indemnification agreements also set forth certain procedures that will apply in
the event of a claim for indemnification thereunder.
Item 16. Exhibits and Financial Statement Schedules.
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
5.1 Opinion of Cooley Godward llp.
23.1 Consent of Independent Accountants.
23.2 Consent of Cooley Godward llp (reference is made to Exhibit 5.1).
24.1 Power of Attorney. Reference is made to the signature page.
</TABLE>
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions described in Item 14 or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
II-1
<PAGE>
the Registrant of expenses incurred or paid by a director, officer, or
controlling person of the Registrant in the successful defense of any action,
suit, or proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change
to such information the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe it meets all of
the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Jose, State of California, on the 21st day of
December, 1999.
eBAY INC.
By: /s/ Margaret C. Whitman
-----------------------------------
Margaret C. Whitman
President, Chief Executive Officer
and Director
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Gary F. Bengier and Michael R. Jacobson, or
either of them, each with the power of substitution, his or her attorney-in-
fact, to sign any amendments to this Registration Statement (including
post-effective amendments), with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Margaret C. Whitman President, Chief Executive December 17,
____________________________________ Officer and Director 1999
Margaret C. Whitman (Principal Executive
Officer)
/s/ Gary F. Bengier Chief Financial Officer and December 17,
____________________________________ Vice President Operations 1999
Gary F. Bengier (Principal Financial and
Accounting Officer)
/s/ Pierre M. Omidyar Chairman of the Board of December 17,
____________________________________ Directors 1999
Pierre M. Omidyar
/s/ Philippe Bourguignon Director December 17,
____________________________________ 1999
Philippe Bourguignon
/s/ Scott D. Cook Director December 17,
____________________________________ 1999
Scott D. Cook
/s/ Robert C. Kagle Director December 17,
____________________________________ 1999
Robert C. Kagle
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
Director
____________________________________
Dawn Gould LePore
/s/ Howard D. Schultz Director December 17,
____________________________________ 1999
Howard D. Schultz
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of Independent Accountants.
23.2 Consent of Cooley Godward LLP (reference is made to Exhibit 5.1).
24.1 Power of Attorney. Reference is made to the signature page.
</TABLE>
<PAGE>
EXHIBIT 5.1
OPINION OF COOLEY GODWARD
[LETTERHEAD OF COOLEY GODWARD LLP]
December 22, 1999
eBay Inc.
2125 Hamilton Avenue
San Jose, CA 95125
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by eBay Inc. (the "Company") of a Registration Statement on
Form S-3 (the "Registration Statement") with the Securities and Exchange
Commission (the "Commission") covering the sale by certain selling stockholders
of 494,133 shares of the Company's common stock (the "Selling Stockholder
Shares").
In connection with this opinion, we have examined the Registration
Statement, the Company's Certificate of Incorporation and Bylaws, each as
amended and such other documents, records, certificates, memoranda and other
instruments as we deem necessary as a basis for this opinion. We have assumed
the genuineness and authenticity of all documents submitted to us as originals,
the conformity to originals of all documents submitted to us as copies thereof,
and the due execution and delivery of all documents where due execution and
delivery are a prerequisite to the effectiveness thereof.
On the basis of the foregoing, and in reliance thereon, we are of the
opinion that the Selling Stockholder Shares are validly issued, fully paid and
nonassessable.
We consent to the reference to our firm under the caption "Legal Matters" in
the Prospectus included in the Registration Statement and to the filing of this
opinion as an exhibit to the Registration Statement.
Very truly yours,
Cooley Godward llp
/s/ Michael J. Sullivan
By :_________________________________
Michael J. Sullivan
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated January 22, 1999, except as to the
pooling of interests transactions described in Note 2, and as to Note 14, which
are as of September 9, 1999, relating to the financial statements which appears
in eBay Inc.'s Current Report on Form 8-K dated September 14, 1999. We also
consent to the reference to us under the heading "Experts" in such Registration
Statement.
/s/ PRICEWATERHOUSECOOPERS LLP
San Jose, California
December 20, 1999
