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 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.