eBay pulls stock auction from Web site...One for the books
By Reuters
Special to CNET News.com
August 23, 1999, 10:45 a.m. PT
CHICAGO--Online auction house eBay on Friday removed a customer's offer to auction shares in satellite telephone company Iridium, saying it was against company policy to sell stocks on its site.
Trading in shares of Iridium, which allows customers to make phone calls from anywhere in the world via a system of 66 satellites, has been halted on Nasdaq since last Friday, when Iridium filed for Chapter 11 bankruptcy protection.
A shareholder had offered to sell a stock certificate for 1,300 Iridium shares through eBay, with an asking price of at least $6,500. That would value the shares at $5 each. The stock last traded on Nasdaq last Friday at 3.06.
The listing, which several legal experts and stock traders said was the first such offering they had heard of, sparked debate about whether it was legal to offer stock certificates online while exchange trading in the shares was halted.
A spokesman for San Jose, California-based eBay said the company does not allow customers to sell stock on its site because of possible legal and regulatory issues.
"There are a number of complex sets of regulations that can apply to stock sales," Kevin Pursglove said in a telephone interview. "Because of the complexity, we just decided that we would not allow the sale of stock on our site."
Pursglove said the ban on stock sales has been in place for several months. The Iridium shares found their way onto the site because eBay does not prescreen items listed for auction, but relies on other customers to patrol the site and ensure the offerings meet its requirements, he said.
"It's a very open system that we have," he said. "It relies very heavily on trust and honesty."
An SEC spokesman declined to comment on whether selling the stock certificates online would be legal. However, he said a person may sell securities to another person privately, even if trading in the shares has been halted.
Trading in Iridium shares was halted last Friday after the company filed for protection from its creditors under Chapter 11 of the U.S. Bankruptcy Code. Iridium has struggled to sign up subscribers to its pricey service and has fallen well short of its revenue targets.
David Ruder, a Northwestern University law professor and former chairman of the SEC, said off-market trading would be legal as long as the exchange, rather than the SEC, had halted trading.
"The stock market is only a place in which the securities are traded," Ruder said in a telephone interview. "Their power and jurisdiction extends only to the trading on their markets. If trading on one market stops, trading can take place on other markets or off-market."
However, he noted that exchanges normally halt trading in shares because of pending news or uncertainty, and he said it may be unwise for investors to buy shares in that situation.
Story Copyright © 1999 Reuters Limited. |
