Why Skype-eBay was the Worst Kept Secret On Wall Street

7 Comments

There were some curious movements in the eBay stock just before the Skype deal was announced. Hitchhiker’s Guide to 650 points out

When the rumors came out last thursday on the Skype acquisition, eBay stock dropped 3.8%. With 1.35B shares outstanding and each share losing $1.53, eBay lost about 2.07B in market cap. With the overall market being flat that day, the 2.07B lost in market cap can probably be attributed to the Skype rumours.

It means that the traders on Wall Street knew way before the “tech crowd” (as we debated the merits of the acquisition) that the acquisition was a foregone conclusion by Thursday closing. With little downward movement in the eBay stock price today (except at opening) the traders essentially covered their shorts/puts early in the morning, taking profits before Meg talks up the acquisition (and the eBay stock goes up)…..

The question I have is who leaked the rumors? Someone at Merrill (eBay advisor), Morgan Stanley (Skype advisor), Skype, and maybe eBay must have really lose lips for traders to be so certain that this transaction would happen.

However, a post over on Skype forums says that the leak might have come from a cabbie in New York who overheard the eBay Executives. And you thought they didn’t understand english….

I kid you not — the week before the announcement, we received a comment in our Customer Support from some NYC taxi driver about eBay acquiring Skype, and we downplayed this as a rumor, which is what it still was for us at that time. The taxi driver replied “look gentlemen, you may disregard it all you want, but I know the facts since I just gave a ride to some eBay execs who discussed exactly what would be happening”. Can’t validate if the story is really true, but looking back, it turned out to be true and funny nevertheless.

7 Comments

Hobart Hill

Hello – we hope you’ll forgive this question, but we are contacting as many sources of information about eBay as possible.

We are a group of eBay UK shop owners who are very concerned about the massive loss of traffic from Google since October and the sudden (coincidental?) appearance in Yahoo searches of a new eBay Directory which no one seems to be allowed to join. http://uk.search.yahoo.com/search?p=best+ebay+shops&prssweb=Search&ei=UTF-8&fr=fp-tab-web-t-1&fl=0&vc=&x=wrt&meta=vc%3D

Please could you let us know if you have any information about this – if not, we apologise for the intrusion. We have recently set up a blog at http://mysterybay.blogspot.com/ to act as the central point of co-ordination and this also contains further details about these eBay/Yahoo developments.

Many thanks,
Hobart

Jesse Kopelman

I think Homer Simpson wandered into the Skype stock room and noticed boxes upon boxes of eBay swag . . .

Jake

The cabbie story is one of the classic rumor/boiler room assertions of authority. Search the usual stock chatter message boards for how many times the cabbie overheard the whole thing.

Mr. Contrarian

Look at this the other way around and you have a recipie for stock rumors.

Marina Architect

“It was the cabbie”. Cabbie and a Trader who didn’t know this was public,? No way. Almost all acquisitions are leaked if you look at equity call/put volume hours before the deal is on the wire. Just a caveat, I am speculating here, it’s an opinion in the wind with no basis in facts. Cheers.

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