Pricing an Emerging Industry: Evidence from Internet Subsidiary Carve-Outs

We examine price behavior in the emerging Internet industry by comparing investor valuation of Internet subsidiary carve-outs with that of the parent. We provide examples of parent firms whose Internet carve-out holdings exceed the market value of the entire parent by a large amount and over an exte...

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Bibliographic Details
Published in:Financial management 2001-10, Vol.30 (3), p.5-33
Main Authors: Schill, Michael J., Zhou, Chunsheng
Format: Article
Language:English
Subjects:
Arbitrage
Business enterprises
Closed end investment companies
Discounts
Economics
Electronic commerce
Equity
Financial management
Industrial market
Initial public offerings
Institutional investments
Internet
Internet industry
Investment policy
Investments
Investor behavior
Investors
Management
Market value
Ownership changes
Practice
Prices
Pricing
Spinoffs
Stock prices
Studies
Subsidiary companies
Valuation
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Summary:We examine price behavior in the emerging Internet industry by comparing investor valuation of Internet subsidiary carve-outs with that of the parent. We provide examples of parent firms whose Internet carve-out holdings exceed the market value of the entire parent by a large amount and over an extended period of time. The results suggest that an important clientele of investors place greater value on direct Internet asset holdings than indirect holdings via the parent, and that arbitrage costs accommodate prolonged mispricing. We find that such price behavior is not exclusively an Internet sector result, but occurs in other emerging industries.
ISSN:0046-3892
1755-053X
DOI:10.2307/3666374