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

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.