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Skype IPO

An IPO for Skype?

Recently, the online auction giant E-Bay has announced their intention to sell their Skype division through an initial public offering (IPO). Some of you might be familiar with Skype, as they are one of the leaders in providing online video and audio conferencing services. Here is an article on this recent announcement by E-Bay:

http://files.shareholder.com/downloads/ebay/676142613x0x287046/ 95ba0c30-057d-4a67-859c-8cac8e7be234/EBAY_News_2009_4_14_General.pdf

Then do some reading up on the online IPO process used by Google and Morningstar using the CyberLibrary and internet search engines. This is an untraditional approach to the IPO, but may or may not be the best approach for a Skype IPO. Here is one article to get you started:

Carter, A. (2005, January 10, 2005). Morningstar Follows Google's Lead. Retrieved August, 2009, from http://www.businessweek.com/bwdaily/dnflash/jan2005/nf20050110_837 2_db035.htm

What type of IPO should eBay use to take Skype public - a traditional IPO or an online auction?

Some issues to consider in answering the above question include:

A. The type of investors Skype is likely to attract

B. The lessons learned from Google and Morningstar from their auction IPOs

C. Costs and risks of each type of IPO

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Solution Preview

The type of IPO that eBay should use to take Skype public is the online auction. The reason for this is that online auction will enable many bidders to participate, the investors will get a joy of winning, there will be less stringent time constraints, and investors from any part of the world can participate.

The type of investors Skype is likely to attract are large mutual funds, pension managers, technical investors, professional investors, large institutions, and foreign investors. Large mutual funds and pension managers are likely to be attracted to online auctions because there is no quota on the number of shares that they may buy. The technical investors will feel that they can get the Skype stocks at really low prices and so they will invest. Professional investors will seek to bid close to the lowest prices and make a killing. Large investors will seek to get large chunks of the shares and since there ...