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eBay to propose share hike
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April 7, 1999: 8:51 p.m. ET
Shareholders to vote on increase in common stock of nearly fivefold
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NEW YORK (CNNfn) - Online auctioneer eBay Inc. will ask its shareholders to approve a nearly fivefold increase in the amount of authorized shares in order to increase the company's flexibility for future mergers or alliances or to ward off a potential hostile takeover.
According to a preliminary proxy filing Wednesday with the Securities and Exchange Commission filing, the company plans to ask shareholders to increase the amount of authorized common shares to 900 million from 195 million. In addition, the company plans to seek approval to double the amount of authorized preferred shares to 10 million from 5 million.
Authorized shares are the number of shares a company is allowed to create under its articles of incorporation. Normally, a company will ask shareholders to approve additional authorized shares to cover future stock splits or option programs.
In the filing, eBay said it had no specific plans to issue the additional authorized shares.
Shareholders will vote on the proposal on May 28.
eBay (EBAY) said in a proxy statement that the additional but unissued shares could be used for a number of purposes, including future stock splits. The company set a three-for-one stock split last month.
The virtual auction house also said the additional shares could be used for "establishing strategic relationships with other company" and expanding its business or product lines "through the acquisition of other businesses or products."
eBay also noted that it could use the additional shares to oppose a hostile takeover attempt or to prevent changes to its management team. However, the company said it is not aware of any third-party attempts to take over the company.
Companies often adopt a poison pill defense to thwart hostile takeovers, whereby they issue additional shares to its stockholders to make the stock prohibitively expensive for potential bidders.
eBay shares fell 2 to close at 150 in Wednesday trade.
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