Schill Zhou.Pricing an Emerging Industry 21 Table V.Comparison of Parent-Subsidiary Management Overlap This table shows management positions on the most recent proxy statement or S-I filing that follows the carve-out for parents dELiA*s(DLIA),Daisytek(DZTK),HNC Software(HNCS),and Creative Comput- ers(MALL)and subsidiaries iTurf(TURF),PFSWeb(PFSW).Retek(RETK),and uBid."Not applicable" means that the management position at the parent either does not exist or is divided among individuals."No position"means that the person who holds the respective position is not listed as an officer or director of the subsidiary. Position in Carve-Out Subsidiary Position in Parent DLIATURF DZTK/PFSW HNCS/RETK MALL/UBID Chairman Chairman Chairman No position Secretary/Director President Vice-Pres/ President No position Secretary/Director Director Chief Executive Chiet Executive Chief Executive No position Secretary/Director Officer Officer Officer Chief Operating Vice-Pres/ Not applicable Not applicable Not applicable Officer Director Chief Financial Vice-Pres/ Not applicable No position Chief Financial Officer Director Officer Exec.VP-Sales Not applicable Exec.VP-Sales Director Exec.VP-Sales Marketing Marketing Marketing effectively the same across parent and subsidiary.Given such an ownership and control structure,agency-based explanations predict that management seeks perquisites from the subsidiary where the personal wealth impact is less.These predictions are inconsistent with the observed market value ratios.An agency-based explanation appears unlikely. Ill.Internet Carve-outs and Opportunism Zweig(1973)and Lee,Shleifer,and Thaler(1991)suggest that the closed-end funds discount results from market mispricing.Their conclusion requires two key features:investor clienteles (rational and irrational)and arbitrage constraints.In their framework,irrational traders are disproportionately attracted to one type of security (the closed-end fund)and move the price away from the rational investors'value.Market frictions impede arbitrage capital from removing the mispricing so that fund prices and net asset values can diverge in equilibrium. Miller (1977,1995)argues that investor clienteles and arbitrage constraints generate mispricing among restructuring transactions such as the equity carve-outs.In his model, carve-outs'prices are set by optimistically biased traders.Short-sale constraints inhibit the arbitrage mechanism.Nanda(1991)contends that companies resort to equity carve-outs when the parent equity is undervalued and the subsidiary is overvalued.If bullish investor sentiment leads to the overvaluation of Internet subsidiaries,parents of Internet subsidiaries