Google Considering IPO Auction Online

HackerStickers writes "An article in the Financial Times states that Google could be considering doing their IPO online via an auction versus the standard methods of raising funds early next year. The article points out that auctioning it could bring in a larger chunk of cash for the company. Would you bid on a piece of Google?"

Comments

Google

[Luigi30]

I'd buy the part with all the logos and make more.

Re:Google

[t0ny]

Oh no! Teh Googli is gonna become another Evil Empire for Slashdot to fight!

Time to Photoshop up another crappy Borg!

Re:Google

[Anonymous Coward]

if you had any sense you already would be...

www.google-watch.org

Analyst reccomends strong buy

[Anonymous Coward]

seriously, if they float then invest everything including your grandma on this stock, price doesnt matter, get in early and watch that portfolio grow

AjS

Re:Analyst reccomends strong buy

[KDan]

With all the trouble they're having with blog noise and all that? Google have alredy done their "grow". They may grow a lot during the IPO too, but after that they will go down, most likely, when people start realising that it's not really going anywhere that fast and it's been over-rated during the IPO. the shareprice will readjust to a strong value, but not a strong growth.

Daniel

Re:Analyst reccomends strong buy

[Anonymous Coward]

You know what I've learned about analysts and their "recommendations"?

They make weather forecasters look fantastic.

Re:Analyst reccomends strong buy

[Durdle]

trouble with Blog noise?

But yea, I totally agree, they're going to pretty much stay where they are stock wise after they go public, and level off.

Way too expensive...

[Manuzhai]

I think not. These shares are indoubtably going through the roof, so they'll be way too expensive for me. I mean, Google is supposed to be worth about 15 - 20 billion!

Re:Way too expensive...

[Anonymous Coward]

Hey, unless you're a brokerage house, you'll probably end up paying what you would have, or maybe even a little less, while google will get considerably more.

I don't see a down side to cutting out the old boy network. Hell, maybe it will be a trend, where merit as opposed to heredity or nepotism determine who can get ahead.

Re:Way too expensive...

[smittyoneeach]

Yeah, but do we really want to see Frank Quattrone cry?
I'll buy if the shares are offered through ThinkGeek. Can we get a free T-Shirt for, say 50+ shares?

Re:Way too expensive...

[Anonymous Coward]

Cry? No. Monkey's eating him alive while he goes through oxycotin withdrawl? Yes.

Re:Way too expensive...

[swordboy]

Didn't we learn anything from the '90s?

I mean, there is no reason for google to go public other than greed. They are making plenty of money on their own right now and I doubt that they are in need of cash for business purposes.

There is so much legalized criminal activity involved with public companies. For example, Netgear just went public and the underwriter (Lehman Brothers) had the option of printing up an extra *million* shares to "cover additional costs".

Additional costs like a big party...

Re:Way too expensive...

[ergo98]

There is an SEC regulation that effectively forces Google to IPO (or to beg for an exemption), so it isn't "greed" but rather simply accommodating financial regulations.

Re:Way too expensive...

[OneSmartFellow]

You well heeled big wheel, you !

Re:Way too expensive...

[Anonymous Coward]

there is no reason for google to go public other than greed ... that you can think of offhand.

Re:Way too expensive...

[kfg]

I dunno. The regulation basically just puts them under SEC scrutiny as if they were a publicly traded company. It's basically an anti rackteering reg designed to "infiltrate" dummy corporations set up as money laundering operations.

The corporate version of having to file with the feds if you spend $10k cash on something.

This isn't really any more reason to go public than the filing requirement for private citizens is to not buy a car.

I think it's really the pressure of the VC's looking to get in and the spectre of MS looming over their shoulder that's got them going.

I think it's a bad idea though. If there's any one web based business that could suffer real harm to their model from going public I think its Google. They're doing a good job. Let 'em do it in peace.

KFG

Re:Way too expensive...

[Anonymous Coward]

Greed alone would not explain why an otherwise profitable comapny would go public.

If the founding members and other private owners choose to remain private they would never have to open their books to the public and they would keep all the profits for themselves. They could stand to make a lot more money that way (The Mars family owns a private candy company)

The IPO provides an immediate cash infusion so that the company can pursue a larger market (national instead or regional) or use the cash for a huge capital purchases. Neither of these seem to be the case for Google. If the goal is an exit strategy for the founders then the IPO makes sense.

However, if they plan on running the company for the rest of their lives then the greedy thing to do would be to stay private.

Re:Way too expensive...

[Toddlerbob]

I agree with the poster above who wonders why Google needs to go public. Once you go public, the bottom line becomes of paramount importance, since stockholders buy into a company to make money and not for the other things that you can do with a large business, such as to provide cool new non-profitable services just because you want to, or to be philanthropic where no tax dodges are involved, etc. etc.

I hope that they resist the temptation to IPO as long as possible, and if they do sell stock, then they at least keep a majority control for themselves. Google is too cool a business to go the way of corporate monetary single mindedness.

Re:Way too expensive...

[ichimunki]

Didn't we learn anything from the '90s?

Yes. Which is why you don't see a lot of IPOs from companies that don't make any money and don't have realistic business plans. As I understand it, Google makes money from actual revenues (as opposed to the dot-com feeling of "making" money by getting it from VCs) and they have a solid business plan. At worst, this IPO is just to help the current investors "cash out" a little-- fair enough. At best, this helps Google fund some new R&D or a new project that requires some major infrastructure.

I believe that there will be little "irrational exuberance" during an IPO like this at this time. I'd be surprised if the stock weren't actually undervalued for a while because so many people will be looking at with the taste of the dot-com fever in mind.

BTW, I find your phrase "legalized criminal activity" amusing. I believe you mean to say there are loopholes which look shady or unethical to your way of thinking, but if it's legal it can't possibly be criminal activity. Besides, printing an extra million shares dilutes the value of all the existing shares. Most professional investors measure company performance on a per share basis. So in the example you give, now the company's profit is spread over additional shares, making their measurements look worse. So while they may have the option to do something, the decision to do it does have an impact which may mitigate the desirability of doing it. It's not like they were being allowed to just print money or something.

Re:Way too expensive...

[October_30th]

Indeed.

MS can't crush Google on technical merits. What's stopping them from buying out Google? It's about time Google went open source.

Re:Way too expensive...

[Anonymous Coward]

It's entirely plausible google will out right need the capital to gear up for a head to head competition with microsoft. Once that battle heats up, we should see a pretty impressive explosion of search engine capabilities, and services. If they neglected to rise to the challenge, there would be only one search engine, Microsoft's, and a host of dabblers. Google doesn't have a choice given their competition. If you want to help google out, I suggest you make all manner of obscenely useful widgets that use google to weird things that no one ever knew they wanted done.

Re:Way too expensive...

[odin53]

That rule doesn't force Google to do an IPO; it forces it undertake reporting obligations that are tantamount to being public (without the benefit of going public). It forces an issuer to register the appropriate class of stock under the 1934 Act and thus be required to file 10-Ks, -Qs, etc. Sucks to be there, unless you've gotten the benefit from an IPO, because it's very expensive to comply with those regs -- the lawyers are expensive, the auditors are expensive, and the liability for screwing up is potentially very high.

Re:Way too expensive...

[Sivaram_Velauthapill]

According to capitalist theory (i.e. finance portion) it doesn't matter what companies do--as long as it is not something illegal (like fraud). The market will sort it out. If people think a company is not worth it, why would they buy it? (don't answer that question please :) ).

Of course, being the anti-capitalist that I am, stock markets are the biggest "scam" since kings/queens started printing money and taxing the peasents.

Sivaram Velauthapillai

Re:Way too expensive...

[rifter]

I think not. These shares are indoubtably going through the roof, so they'll be way too expensive for me. I mean, Google is supposed to be worth about 15 - 20 billion!

Muahahaha. IT looks like they are pissing off the banks who wanted to make a killing off this fat IPO. Look at the jealousy!

"They could get a $100bn" stock market value, said one person involved.

"However, all the shares would end up with Aunt Agatha in Des Moines and Uncle Milt in Pittsburgh and there would be no real public market at all."

Okay, so they are mad the shares might actually get owned by ordinary people instead of investment brokerages/banks, and they dare to claim this means no *public* market? What is their definition of people? The same as Stalin's definition of People? (as in Enemy of the People, Property of the People, etc)...

Oh but the juiciest bit is who this comes from:

Frank Quattrone, the star investment banker who controlled many of the dotcom stock allocations, is awaiting the verdict in a trial that sprang out of the scandals.

He was accused of destroying evidence to hamper an investigation into the affair.

Google, do your IPO on ebay and really piss them off! Support the .com economy! :)

Re:Way too expensive...

[sql*kitten]

I mean, there is no reason for google to go public other than greed.

You know nothing about business. One of the most useful things about being a public company is the ability to use your own stock as a currency for making acquisitions. Far, far more efficient that paying cash for another company. An IPO could be simply so Google can use its capital more efficiently.

Google on Ebay?

[cubicledrone]

100 million shares: 100 million auctions.

Re:Google on Ebay?

[BrianGa]

One word: Dutch.

Uhm, yes, I would, but not immediately

[heironymouscoward]

Auctions are an interesting way to do this but I expect that as usual with auctions the hype will cause the price to jump higher than it might otherwise. Then it will fall to a "normal" level (at which point I will buy some stock if I have any money left from selling my second Porsche), before gradually climbing up to dizzy heights (at which point I will sell my stock and buy three new Porsches).

Re:Uhm, yes, I would, but not immediately

[letxa2000]

As they said, an auction would net Google more money. That means the investor would pay more which lessens the urge to actually participate. Of course, it at least gives you the option to participate in the IPO whereas normally only good friends of important people get to participate.

It seems, though, that an auction will mean that everyone will pay the maximum amount for the shares rather than a tempting IPO amount. So instead of some people getting in at a $10 IPO value (for example) and riding it to $100, everyone will have to pay $100 each and there will be no IPO ride.

What this means to me that there is no pressing reason why I should participate in the IPO. Presumably the auction will set a price very close to what it will be trading at when shares become available through traditional channels, so why bother? Just wait a few days and see how the stock moves. IPOs in the past have been tempting for investors because there is an expectation it will rise quickly, so everyone wants in. If the IPO is at the "already risen" stock price then there's no rush to get in at the very beginning since a few days later will be essentially the same price on the open market.

This only makes sense for Google, and only the owners. As someone else has said, they already have good profit and I doubt they need more to grow the company. If the company doesn't have any plans on why it needs/wants $15 billion (other than to make a few owners rich) I'd be skeptical of giving it to them.

Re:Uhm, yes, I would, but not immediately

[milo_Gwalthny]

Historically the 12%-15% IPO discount to market has been thought to compensate for the additional due diligence needed to invest in a new issuer. Assuming that the big money boys price that into their bids, then us small money boys could buy on their due diligence coattails and get a 12%-15% step-up for free.

As long as you believe that the market-movers actually know what Google's worth.

Re:Uhm, yes, I would, but not immediately

[urbazewski]

So instead of some people getting in at a $10 IPO value (for example) and riding it to $100, everyone will have to pay $100 each and there will be no IPO ride.

Good point overall, but remember for every person that sold a share of stock at $100 (got the ride up from $10) there's someone who bought a share of stock at $100. Presumably, these buyers either expected the value to continue going up in the short term or they expected it to go up over time. For every person who bought low and sold high there's someone who bought high. These people typically lose money --- historically IPOs have tended to be bad investments unless you flip fast.

This only makes sense for Google, and only the owners.

Basically, what they are doing is replacing the IPO round of trading with a mechanism that more closely resembles the stock market and creates equal access for buyers. (It's still a monopoly on the supply side of course.)

The way that traditional IPOs create a windfall for people with investment bank connections (where stocks are typically priced low enough to ensure that they all shares are sold quickly, and then rise in value when they hit the market) has always struck me as a massive scam. It benefits the banks and their clients at the expense of the company and smaller investors without connections.

The whole point of an IPO is to raise money for the company --- it's supposed to benefit Google, not well connected investors.

As for the auction, the poster is absolutely correct: it's likely to suffer from the 'winner's curse.' The shares will be sold to the bidders with the very highest expectations for the stock value, making it unlikely that there will be a pool of even more bullish investors around to push the value of the the stock higher in the future.

Re:Uhm, yes, I would, but not immediately

[letxa2000]

As long as you believe that the market-movers actually know what Google's worth.

Of course they don't. :)

But I'm not very optimistic at Google increasing profit on a constant basis. Yes, they're doing well and I think they can continue to do well. But if they are seeing profits of $150m/year, then anything over about $5 billion market cap is just out of line. There's not a whole lot of growth available to them short of changing their service so much that it becomes less attractive to Internet users. And if it's not about growth then I need to see dividends that make my investment worthwhile. If they have over about $5 billion market cap then I'd be better off investing in a savings account.

Anyway, if they do a traditional IPO I'll probably buy some stocks the first day and try to ride it for awhile. I don't think it's a long-term good investment, but the IPO ride should be predictable. But if they go with an auction I'll probably pass because the initial price will have the "IPO ride" already factored into it. Google will get the profit instead of me. That's fine for Google and it's their right, but it doesn't help me.

Re:Uhm, yes, I would, but not immediately

[Maudib]

There costs must be extraordinarily high, and are probably rising, who knows what their revenue actually is or whether it is keeping pace with costs?

Also, keep in mind who they are competing against, MSFT and yahoo. Sooner or later those two will be able to squeeze out Google by virtue of more $. An IPO level that playingfield.
Also, the auction may or may not generate a higher stock price, but Google is assured a more moeny from the IPO either way, as the direct auction cuts out the Investment Banker fees. Its a smart business move, dont be such a troll

Re:Uhm, yes, I would, but not immediately

[milo_Gwalthny]

As you, implicitly, note, it's not how whether you believe they will have growth so much as whether you believe they will have less growth than everyone else believes. Even a no-growth, income earning company is worth something... much like a bond: your principal doesn't grow, but it pays interest, so the bond is worth something.

I think you're right though that the market-movers don't know that much, or that they're generally too optimistic, so actual growth will probably be lower than the growth priced into their bids. That's why I won't be buying any at auction. Or, at least, not betting the farm.

Re:Uhm, yes, I would, but not immediately

[xtheunknown]

Maybe this will shed some light on the subject...

"It's a variant on the so-called Dutch auction. In traditional auctions, the price rises until one bidder is left. In a Dutch auction, the auctioneer sets an extraordinarily high price and lowers it until someone bids on the item."

Dutch Auction IPO

Re:Uhm, yes, I would, but not immediately

[Sivaram_Velauthapill]

Presumably the auction will set a price very close to what it will be trading at when shares become available through traditional channels, so why bother?

The price of a "normal" IPO is set at what is believed to be the true value of the firm. According to finance theory, the "final" IPO price should end up at a similar value to that of the inital offering. Finance experts and economists don't really know very well why the price shoots up so high. Some say it is based on speculation, hope, etc. I personally believe that the price shoots up because of pump&dump "scams" and hype brought on by investment bankers. You'll find that most stocks end up close to or below the IPO price.

So, when you say that people can't make money off pumping up the IPO price (as they usually do), it doesn't mean much. The price increase is not "justifiable". In that respect, I don't think there is any difference between an auction IPO and the "traditional" IPO.

Sivaram Velauthapillai

Re:Uhm, yes, I would, but not immediately

[deraker]

"I doubt they need more to grow the company." You obviously dont understand the capital markets. Google could clearly put a couple hundress million to use on better product development. The only reason why they would go public would to raise capital - they are selling equity for cash. Selling at the market price is way for Google to maximize its revenue and not necessarily benefit its underwriter with cheaper than market shares for distribution.

Re:Uhm, yes, I would, but not immediately

[rifter]

But I'm not very optimistic at Google increasing profit on a constant basis. Yes, they're doing well and I think they can continue to do well. But if they are seeing profits of $150m/year, then anything over about $5 billion market cap is just out of line. There's not a whole lot of growth available to them short of changing their service so much that it becomes less attractive to Internet users. And if it's not about growth then I need to see dividends that make my investment worthwhile. If they have over about $5 billion market cap then I'd be better off investing in a savings account.

You seem to assume that their website is their only source of revenue. This is not the case. They provide a variety of products and services, including licensing their search engine code, selling search appliances, and more. Heck, it seems that Yahoo is using Google's engine now, and so are a lot of others, because it is the best. This is why they are going to grow in revenue like crazy! IANASB, YMMV.

Re:Uhm, yes, I would, but not immediately

[letxa2000]

You obviously dont understand the capital markets.

Do you just like to troll or didn't you read my entire message?

Google could clearly put a couple hundress million to use on better product development.

Of course. The point is that analysts estimate they have an annual profit now of at least $150 million. That's more than enough for R&D without having to seek outside funding in the way of an IPO. If they only were making a million or two in profit each year, yeah, do an IPO to do the R&D you need to grow. But the company apparently already has sufficient profit to do whatever software R&D they need, so if you're the owner of Google why give up your equity and control if you don't need to?

The only reason why they would go public would to raise capital - they are selling equity for cash.

Obviously. But why are they selling equity for cash?

1. They want to expand or need to invest more in R&D than they have available right now. Assuming analysts are right with their $150 million annual profit estimate, I think they have sufficient funds to do the R&D and expansion they feel they need to do.

2. The owners just want out. They've built a successful company and just want to retire. Possible.

3. The owners want to pocket a few billion in cash. The amount of money they're talking about ($15-20 billion, maybe even $100 billion) is an obsecene amount of money and more than they could possibly need to grow. Heck, they could operate the company on the interest raised by that amount of money. Perhaps the owners just aren't satisfied with $150 million/year profit and want to pocket a few billion from the proceeds.

4. If they succeeded at a $100 billion IPO, maybe they just want to buy a third of MSFT. :)

Selling at the market price is way for Google to maximize its revenue and not necessarily benefit its underwriter with cheaper than market shares for distribution.

I don't deny that. As I said in my previous post, this makes sense for Google and the owners of Google. But as an investor I'm hestitant to play.

IPO=Death

[Marxist Commentary]

By becoming public, google loses the ability to continue with constant steady growth and innovative R&D. These things will invariably lead to short sighted planning by the management to "make the numbers" for the next quarter, 6 months, or year. "Growth" will be expected year after year - the innovative ideas that have made google so successful will give way.

No, I won't bid on a share. I would hope that the IPO never happens, as google is still a quality company. I would hate to see that all change.

Re:IPO=Death

[gfxguy]

I don't know if it equals death, but I am thinking along the same lines. Is google not the most popular search engine? Does it not make enough revenue?

If it doesn't make enough revenue, why would investors think this is a good deal?

If it does, why would the private owner(s) have an IPO? Sure they can make a ton of cash - but aren't they doing that now? Obviously they are tired of the business and want to get out and make a lot of cash while doing it.

Re:IPO=Death

[koh]

By becoming public, google loses the ability to continue with constant steady growth and innovative R&D.

"Growth" will be expected year after year - the innovative ideas that have made google so successful will give way.

So you say that if people obsessed with growth show up, google would magically lose the ability to grow ?

the innovative ideas that have made google so successful will give way

Of course you realize that google stands up as an example for many, and that doing the IPO online maybe would attract people that are in tune with google's ideals and previous strategies ?

No, I won't bid on a share.

By your own words, if you're not planning to be providing "constant steady growth and innovative R&D" the next few years, please do so.

Re:IPO=Death

[SpaceLifeForm]

No, not death, but a fate far worse than death.

Google would end up being controlled by Microsoft.

Re:IPO=Death

[Threni]

"would attract people that are in tune with google's ideals and previous strategies"

No, it will attract people who believe they can make money from buy/selling stock.

Re:IPO=Death

[seschmi]

It actually depends on the expectations of the shareholders, if an IPO leads to the death of a company. Normally a company is expected to be worth a certain multiple of its earnings (or better, the cashflow, because cashflow is difficult to forge). A normal multiple would be 10, which gives me a 10% return rate (I buy the company for 100 and get 10 out of it every year). If google has USD 100 Mio of earnings, it's worth would be USD 1000 Mio, if valued this way. This of course would be a fair value, because it enables them to pay their investors an annual dividend of 10% of the stock price, even without any growth. In this scenario, they could stay in their search-engine-business, something they can (obviously) handle successful. The problem is, google will not aim at a valuation of one billion, they will aim at a valuation that is about ten times higher. And that means, they will have to grow a lot in a short time, something that will propably kill them.

Re:IPO=Death

[Anonymous Coward]

If the company manages to retain strong leadership, and with evangelical masses this may be possible, and doesn't lose their sense of direction, this massive capital infusion could give them an ability to compete strongly with microsoft's capital advantage.

If they just stay the course, eventually, microsoft will be able to leverage their natural advantage and bury them. Yes, we all know they're ebil, blah blah blah. But if microsoft brings out the first natural language search engine, that has a good grasp of context, can do a half way decent job of grouping people, places and things together, you'll all be using it. You'll be bitching about it here, but you'll still be using it, monogomously too.

Re:IPO=Death

[falconed]

Google would end up being controlled by Microsoft.

You're insinuating Microsoft would do a hostile takeover of Google. IIRC, Microsoft would have to own 51% of the company by buying shares of the IPO (or acquiring them later on, etc). This is only possible if Google releases 51% of their shares when they go public. The company I work for recently went public and did not want to have to worry about a hostile takeover (we're relatively small - our competitors would gobble us up if they had the chance) so they only released ~ 30% of their shares. And they haven't become obsessed with the stock price; we're just as committed to providing quality products to our customers.

Re:IPO=Death

[leiprecht]

If Google appoints an equal number of techies on their board.... hmmm yeah, I would buy stocks. Otherwise, agreeing with the poster, they are doomed to fail. People with money and without technological knowledge are dangerous for a company like google. refering to the auction... good idea, they would save a lot of costs for their IPO if they auction the shares

Re:IPO=Death

[Ab0rtRetryFail]

Quoth the Leftist Analysis:
"By becoming public, google loses the ability to continue with constant steady growth and innovative R&D. These things will invariably lead to short sighted planning by the management to "make the numbers" for the next quarter, 6 months, or year. "Growth" will be expected year after year - the innovative ideas that have made google so successful will give way."

I think that Google could still do this as a public company. There are a handful of companies now that do NOT issue quarterly guidance, focusing instead on the long-term (like they should, IMHO). These aren't small companies either -- I know Coca-cola does it. Google doesn't necesarily have to issue quarterly guidance if it doesnt want to. I think it has a commanding enough position (and certainly would have a top spot on the exchange if they went public) to not have to kowtow to the Street. I for one would LOVE a Google IPO -- the interest it would create would be tremendously beneficial to my portfolio. I don't think would signals the end of the Google we all know and love -- selling shares to the public is not the same as selling your soul. As long as Google has smart, talented people working for them, and as long as they gaze over their shoulder to see Yahoo and M$ breathing down their throat, I think they'll stay the same, IPO or not.

Re:IPO=Death

[Anonymous Coward]

Besides, has Google done something really innovative since Pagerank? I think Google is at its height of public brand awareness and usefulness. There isn't really anything which could replace Google yet, but the quality of Google's search results is on the decline. Google's charme has always been that it didn't sacrifice the main purpose in order to make a buck, but that's going to have to change if they need to keep growing -- unless they have something truly new up the sleeves, but I doubt that.

Re:IPO=Death

[leerpm]

"By becoming public, google loses the ability to continue with constant steady growth and innovative R&D. These things will invariably lead to short sighted planning by the management to "make the numbers" for the next quarter, 6 months, or year. "Growth" will be expected year after year - the innovative ideas that have made google so successful will give way."

Actually, quite the opposite. By staying private they lose the ability to keep the talent on board by issuing those high-valued employees stock in the company. Sergey Brin himself has mentioned this several times in the past. While being private gives the company more freedom with its financial affairs, it needs an IPO to keep growing and move forward.

Re:IPO=Death

[Safety Cap]

Google is punking out. The reason they are doing this is to sidestep underwriters and their fees.

If they go public, there will be greater pressure to avoid "controversial" stories about them that will affect their stock price. If Google had been a publicly traded company back in the day, then the scientology/operation clambake thing might have gone down much differently (and worse for the public).

Re:IPO=Death

[seschmi]

With an IPO, you simply get the ability to pay in promises instead of cash. If you promise to grow X per cent during the next y years, this will raise the share price and capital increase will exchange that share price for cash.

Same with the employees - instead of giving them more cash, you give them promises (called "stock options").

Sounds nice, the only question is wether people believe you or not. I've myself owned promises (stock options) worth several millions some time ago (worthless now, of course), so I prefer cash instead.

Furthermore: You don't need an IPO to give shares to your employees. Shares entitle their owners to get parts of the earnings, so if the company performs well, the employees will participate in this, even if the company is not public.

Re:IPO=Death

[BabyDave]

"Growth" will be expected year after year - the innovative ideas that have made google so successful will give way.

So you say that if people obsessed with growth show up, google would magically lose the ability to grow ?

'Growth' means two different things:

1. Improvement of the services Google provides
2. Profit[0]

The problem people are worried about is the push for the latter form of 'growth' getting in the way of the former - Google stagnates (or just plain starts to suck) because the big shareholders want more money out of it.

[0] Yes I know, it's a list with the word 'profit' in it, but not preceded by '???'.

Re:IPO=Death

[AlecC]

Google would end up being controlled by Microsoft.

How about the other way round? According to the article, if Google whip up enough hype among private investors, they could raise $100bn. Microsoft is worth a bit over $300bn, so they take that $100bn and make a 25% cash, 75% stock offer for Microsoft. And Microsoft end up being run by people with the understanding of real value and service that Google has.

No, I don't believe it either, but it is a nice thought.

Re:IPO=Death

[sdcharle]

Yeah, but...

A recent issue of Barron's points out Google has reached conditions that require it to make reports to the SEC, much like public companies are required to do. It's a 1934 law which takes affect once companies have 500 shareholders and $10 million in assets. There's a reference to it on Motley fool: Gunning for Google

So, while you're right, and realize unlike some others around here that IPOs are not pure good, for Google, if they have to open up their business like this and make these reports like a public company, why not reap the financial rewards of an IPO? This is part of what's motivating them.

Re:IPO=Death

[I8TheWorm]

You couldn't be more right. There is a HUGE difference between a private and a public company. Private companies can still take a hickey on short term earnings during heavy R&D. If a public company were to do that these days, the entire board and C*O staff would be out the door... replaced by some suits that only care about the next earnings report.

When a private company does really well, an IPO can be a painful death. Of course, it could also mean the owner(s) want to cash in and move to the Bahamas.

Re:IPO=Death

[I8TheWorm]

Just a little bit of clarification. It's the P/E Ratio (Price to Earnings) that investors are concerned about. The average over the long haul for the S&P is about 16%. During the DotCom boom, the average P/E ratio of those companies was somewhere in the 40% range... WAY off the map. Anything bought below the norm is considered a value stock, anything above is considered a growth stock.

Either way you slice it, the typical investor is concerned with the P/E, as you mentioned. The problem with that is if the immediate P/E drops, they tend to dump the stock pretty quickly. So if said company reinvests capital for say a new server farm, investors don't tend to look at that as a profitable move for a company, and run form it. Private companies don't have that problem, as they get the opportunity to look much further down the road.

Re:IPO=Death

[SpaceLifeForm]

A company can be controlled without owning 51% of the shares. See board of directors.

Re:IPO=Death

[seschmi]

Just a larger bit of clarification:

• The P/E ratio ist usually not expressed in percent, but as a number. So "16" means the value of the company is 16 times the earnings, which is quite high for my taste
• Another ratio is PEG (Price/Earnings/Growth), where the P/E/Ration is divided by the long-term Growth rate. Values below 1.0 are good.
• Furthermore, you should not forget dividend yield - while dividend where extremely unpopular in the US for a long time, even Microsoft pays dividend now.

Re:IPO=Death

[RedWizzard]

What are you talking about? This is not insightful, it's wrong. There is nothing to stop Google's owners from issuing stock to valued employees.

Re:IPO=Death

[I8TheWorm]

True on the dividend yield information. What makes it unpopular in the US is the difference in taxing of the earnings. If it's reinvested by the company, it's taxed at the regular rate for the shareholder. But if it's paid out, the investor can reinvest it themselves, or take a capital gain (at the cap gains tax rate which could be lower for the investor), provided it was earnings that accrued in less than one years time.

And you're right... I flubbed on the % in P/E ratio (even though it really is a %, it's not expressed that way). Thanks for catching that.

Re:IPO=Death

[10Ghz]

By staying private they lose the ability to keep the talent on board by issuing those high-valued employees stock in the company.

How so? Just because the shares are not publicly traded does not mean that the company does not have shareholders. Why couldn't Google give employees shares in the company and give the bonuses through dividends for example? Company does not have to be publicly owned for that.

Re:IPO=Death

[blizzardsoup]

By staying private they lose the ability to keep the talent on board by issuing those high-valued employees stock in the company.

The valued employees already very likely own stock and/or stock options in the privately held Company. When private Company goes public (IPO), the private stock simply gets converted to public stock.

Many employees now busting their humps 12+hours a day will dump their stock ASAP, call in rich, and lose quite a bit of incentive to put in more than 8 hours. I've personally seen this happen in several start-ups during the good-ole days of the bubble.

Conversely, staying private means that the company needs to string the private-stock-option-holding employees along with the hope of eventually going public. Eventually, employees get tired of waiting and bail (if they can find a job somewhere else).

The moral: cash is the incentive program preferred by 99% of employees.

Re:IPO=Death

[Anonymous Coward]

Microsoft probably has the highest % of millionaire employees. I'm sure there are some who tell their boss to fuck off once they cash out, but they haven't had the brain drain some companies have.

Re:IPO=Death

[semanticgap]

the innovative ideas that have made google so successful will give way

Well, but these guys have to cash out on their hard work sooner or later.

Innovation -> IPO -> Stagnation

is a natural cycle that gives an opportunity for others to succeed. On the other hand

Innovation -> IPO -> Stagnation -> Chapter 11 -> Govt Help -> Reimergence

(think worldcom) is a terribly unnatural cycle, one where everyone loses.

Re:IPO=Death

[subterranean]

Google's post-IPO business plan:

1. Subscriptions for "premium" services.
2. Subscriptions for "premium" services.
3. Profit!!!

Re:IPO=Death

[mccrew]

While you are correct that there is nothing to stop the Google management from issuing stock to valued employees right now, it would be mostly just an interesting intellectual exercise. This is because there is no market for the employee to go to and convert that stock into cash.

Re:IPO=Death

[Gumber]

Yeah, Microsoft's IPO sure killed the company.

Does anyone even rember those guys? They could have been dominant, real long term players. Instead they went the IPO route, did god knows what with the cash they raised, and disappeared into the trash-bin of history. Totally forgotten.

Re:IPO=Death

[thegrommit]

By becoming public, google loses the ability to continue with constant steady growth and innovative R&D. These things will invariably lead to short sighted planning by the management to "make the numbers" for the next quarter, 6 months, or year.

How exactly does providing Google with massive amounts of capital take away their ability to innovate? Xerox were a publically listed company for many years, yet they (or rather PARC) still managed to produce many useful innovations.

Depending on the way they structure the deal, the founders can retain a controlling share (not necessarily >50%) of the company, thus making them less beholden to the financial markets. It would then be up to potential shareholders to decide whether they wanted to buy into such a company.

Re:IPO=Death

[Rude Turnip]

16%? No way...Ibbotson's, the unofficial, official source of long-term rates of return for the investing community, says 10-12%.

Re:IPO=Death

[Rude Turnip]

The only thing they've been required to file with the SEC so far is "Registration of sale of securities [Regulation D and Section 4(6) of the Securities Act of 1933], item 06", which is only on paper, not even electronic. It just means some Google shares changed hands between shareholders and I don't believe any financial data would be in those filings.

Re:IPO=Death

[meme_police]

P/E isn't stated as a percentage because the price is almost always higher than the earnings. If it's not then you should be buying a lot of that particular stock.

Re:IPO=Death

[nelsonal]

I know Cargill (a big private farm services company, like ADM) was issuing stock to employees. They set a price (probably using public competitors multiples of their assets and earnings) at regular periods and permitted trading (with the company), under a set of restrictions. The company's management felt that they were losing too many good employees to public comanies and instituted the policy to stem the losses.

Re:IPO=Death

[meme_police]

There are many ESOPs (Employee Stock Ownership Plan)s for private companies. Usually an accounting firm comes in an audits the company annually to set the share price for the forthcoming year. Vesting periods vary. Cashing out is usually done if the company is bought, if the employee leaves the company, etc. I was lucky enough at one company to leave right before they disbanded their ESOP, they vested everyone 100% without regard to service time, and even though I had already given notice and was going to be gone before the ESOP termination I received a great going away present, 100% of my shares.

Re:IPO=Death

[Anonymous Coward]

FYI...analysts place google's valueation around $16B, about 16x their expected profits for this year.

Re:IPO=Death

[I8TheWorm]

Maybe currently, but at least as recently as 1997, through the entire history of the S&P 500, it was 16. The reason I know that is I was a quantitative analyst for AIM at the time and did the study for Lipper Analytical, who reports to Russell, Wilshire, Smith Barney, Merrill Lynch, and a multitude of other brokerage houses.

This is not my study, but it pretty well lines up with it.

Re:IPO=Death

[sacrilicious]

By staying private they lose the ability to keep the talent on board by issuing those high-valued employees stock in the company.

An IPO is a one-time event. If an IPO is lucrative, then there's that tremendous (one-time) upside to the shareholders that pre-bust times were so famous for. But as far as affecting the ongoing state of a corporation, the IPO pales in comparison to whether the company is private vs public. Stock options can be issued for private corporations, even ones that never intend to go public, and shareholders can realize dividends from those share; so the ability to issue shares and have them be worth money does not distinguish private status from public. The real distinguishment between private and public is that public companies have a duty - both fiduciarily and (more bindingly) legally - to make money. For a public company all other concerns are secondary, including the public good, the well-being of employees, ethics, innovation... even the long-term viability of that very company. If it turns out that a public company can make the most profit by selling sandwiches made of bread and horse dung, and can through legal hair-splitting and jurisdiction shopping somehow find a way to technically remain within the law, then corporate bylaws dictate that the corporation must enact this course of action, and shareholders will expect no less.

Re:IPO=Death

[mst76]

Sounds nice, the only question is wether people believe you or not. I've myself owned promises (stock options) worth several millions some time ago (worthless now, of course), so I prefer cash instead.

Cash is also a promise, only from a presubably more reliable organization.

Re:IPO=Death

[odin53]

It's not an interesting intellectual exercise. The employees have the same upside as the investors and founders -- they're waiting for the IPO (or merger), too.

Re:IPO=Death

[Anonymous Coward]

Are there any dumbshits left in the valley who are still willing to pretend that stock is worth something? I thought everybody had learned their lesson: ONLY EXECUTIVES MAKE MONEY FROM OPTIONS ANYMORE. Tattoo that shit in reverse on your forehead so you can look in the mirror every morning and be reminded, if that's what it takes.

Re:IPO=Death

[Anonymous Coward]

Yeah, and the only reason this works is because their stock price keeps going up, and up, and up, partially due to their monopoly, and partially due to accounting acrobatics that they use to make their earnings ultra smooth and predictable (push profits into the future, etc.). They also have used permatemps and used "options != salary" subterfuge to pump up their earnings numbers (for which they have been in trouble lately).

Trying to replicate Microsoft's success with options requires that you first become the largest software company in the world, get a monopoly, play accounting games, and wait a decade or so until everybody assumes your stock price will go up forever. Then you can pay your people in promises because they will always come true, until one day they don't, and the sky caves in.

Re:IPO=Death

[Anonymous Coward]

> selling shares to the public is not the same as selling your soul.

Bzzt, thanks for playing.

Re:IPO=Death

[sfjoe]

Quoth the Ignorant, Right-Winger:
Google doesn't necesarily have to issue quarterly guidance if it doesnt want to.

Financial reports are not optional. They are required by the SEC and Federal law.

Re:IPO=Death

[Sivaram_Velauthapill]

Why do you say that? What does going public have to do with anything? The stuff you said happens when the company is private as well--except the details are kept behind closed doors. Do you think the private investors don't worry about "numbers" and "growth".

Besides, if what you are saying is true, why are nearly all the largest companies public? How many of the top 500 companies are private? Very few. If private companies are truly more innovative, they will crush these large public companies (as capitalist theory claims). It hasn't happened so far.

I think you are mistaking SIZE of a company with going public. Perhaps smaller (and medium sized) comapnies are innovative but that's all.

One of the reasons--if not the most important reason--a company goes public is to raise capital. Often, firms can't raise enough money by staying private. Capital, under capitalism, is THE most important thing (Karl Marx didn't call his book Das Kapital without a reason :) ). If Google, or similar company, did not go public, I highly doubt it will grow into a large corporation. You are never going to get the billions necessary to monopolize your markets and take on large scale projects.

Sivaram Velauthapillai

Re:IPO=Death

[Anonymous Coward]

Amazing you still have no replies. This is important. Wonder why Slashdot is so concerned with Microsoft, while CoS get no publicity at all. Negative, that is. Or it is always marked as 'flamebait'? Shouldn't be...

Your Moderator

Re:IPO=Death

[Anonymous Coward]

And yeah, I stand by my comments, by the way. User ID 'Man Eating Duck'. Anon, because I felt the need to mod the parent up. Please reply if you have anything to add.

Re:IPO=Death

[Safety Cap]

Maybe they took over /. while no one was looking?

Heck, if it is good enough for CAN, then it is good enough for this place...

Re:IPO=Death

[Ab0rtRetryFail]

Financial reports are not optional, true, but that does not mean that Google would still have to give future earnings guidance (i.e. what they think they will make a year from now) to the street. Coca-Cola has chose to refrain from doing this. I'll see if I can find the relevant article.

Also, I'm not an ignorant right-winger. I was deconstructing the previous person's name because I find it amusing to do so, not making judgements on his political views.

Your deconstructed name, for example, would be Bay Area caffinated beverage.

My political affiliation is left-leaning independent, and I'm quite astute, thank you very much.

Re:IPO=Death

[ron_ivi]

' "would attract people that are in tune with google's ideals and previous strategies"

No, it will attract people who believe they can make money from buy/selling stock. '

Ah, but that is indeed inline with google's ideals and stratgies!

Yeah, I would...

[WIAKywbfatw]

I'd pay $20 a share for a stake. Uhh, I mean $22. No, wait, make that $24. Did I say $24? Darn, I meant $26. No, I take that back, what I really meant was...

Re:Yeah, I would...

[Thing 1]

It'd be even cooler if they did their IPO on eBay.

Top that: eBay doing its IPO on eBay! (I know, I know, they're already public, don't let reality get in the way of a cool fantasy...)

Re:Yeah, I would...

[telstar]

"I'd pay $20 a share for a stake. Uhh, I mean $22. No, wait, make that $24. Did I say $24? Darn, I meant $26. No, I take that back, what I really meant was..."

• There's a job waiting for you at SCO with steadfastness like that.

Re:Yeah, I would...

[nelsonal]

Ebay currently doesn't permit trading of actual public securities on its service, there are a ton of regulations on how this would work, and becoming an exchange it would require them to alter thier stance on fradulent auctions. Exchanges aren't allowed to hide behind caveat emptor when a counter party doesn't deliver the goods. However, after growth stagnates in other areas they will likely move into finance.
Investment banking is a huge, profitable industry that currently thrives on a few close relationships to place securities in the hands of investors. Just as trading used use people in an open outcry system, and now largely uses computers, even the NYSE is slowly moving away from specialists, (they're faster, cheaper, and more efficient) the placement of new securities will probably be done with computers in our lifetime, much to the chagrin of the bankers, who currently define the meaning of making bank.

I always feared the day they'd IPO!

[John_Booty]

When you open up your company for outside investment, that's when a lot of companies go to shit. When you're privately-owned, you can be content to simply turn a nice profit every year.

When you have an IPO, though, your company is worthless to investors unless you continually grow and grow and grow.

Google could continue doing what they're doing right now and maintain a constant level of profit (assuming they're profitable right now, which they supposedly are). But if they hae an IPO they're going to have to try more and more ways to wring more and more money out of investors and users. Get ready for what may be the slow degradation of one of the last "pure" and amazing things on the web...

Re:I always feared the day they'd IPO!

[millette]

I'm responding to this post as well, since they're a bit contradictory.

• By becoming public, google loses the ability to continue with constant steady growth and innovative R&D
• your company is worthless to investors unless you continually grow and grow and grow

So, which is it?

Re:I always feared the day they'd IPO!

[Anonymous Coward]

Your parent post stated the second of your points, not the first.

Re:I always feared the day they'd IPO!

[millette]

My comment and quotes relate to these:

• message 1
• message 2

Re:I always feared the day they'd IPO!

[millette]

replying to myself - well, replying to the moderators actually. Guys, you've got to learn what overrated means before hitting that button. Help yourself to the faq if you need a refresher.

Re:I always feared the day they'd IPO!

[ndogg]

So let's change the situation. Companies always do what is in the interest of its shareholders, and if all its shareholders was geeks, then ____ . [fill in the blank]

Re:I always feared the day they'd IPO!

[kinnell]

In reality companies either grow or shrink, it's next to impossible to keep them at a steady profit. But that's beside the point - why wouldn't you want your company to grow?

A more interesting question is: why do they want to float? This is normally because the business needs massive capital investment in order to achieve it's objectives, but it seems that google already has sufficient infrastructure, market share and R&D capability. If it's making good profits, why share them with other people? Could it be that the owners aren't too optimistic about the future, and want to cash in while the going's good?

Re:I always feared the day they'd IPO!

[John_Booty]

I'm responding to this post [slashdot.org] as well, since they're a bit contradictory.
* By becoming public, google loses the ability to continue with constant steady growth and innovative R&D
* your company is worthless to investors unless you continually grow and grow and grow

So, which is it?

They're not quite contradictory- the thing is, with outside investment, there's a lot of pressure for QUICK growth. The investors have just poured X million dollars into your company, they want results, and you are under pressure to deliver those results quickly.

When you don't have outside investment, you can go the "slow and steady" route... concentrating on turning a profit... slow, sustainable growth. You have only yourself to please with your company's progres, not outside investors.

One's not necessarily better than the other. Often you *need* that outside investment to get to the "next level". But outside investment is often damning, as often companies put themselves out of business by trying to grow too quickly, too soon and falling on their faces (financially-speaking) instead.

Re:I always feared the day they'd IPO!

[John_Booty]

In reality companies either grow or shrink, it's next to impossible to keep them at a steady profit. But that's beside the point - why wouldn't you want your company to grow?

Of course you want your company to grow, but growing too quickly can be a very bad thing- that's the only concern. It happens a lot, with or without outside investment. We had a local chain of pharmacies around here. They were around for years and years, so I assume they were in the black. At some point they got too ambitious and started expanding their stores in questionable ways and building a bunch of new ones in questionable locations. The result? They were out of business in a year.

Now it's certainly true that you can't get anywhere in business without taking some risks. Lots of companies have flourished after expansion or IPO's. But taking bad risks is one of the quickest ways to get OUT of business. :P

A more interesting question is: why do they want to float? This is normally because the business needs massive capital investment in order to achieve it's objectives, but it seems that google already has sufficient infrastructure, market share and R&D capability. If it's making good profits, why share them with other people? Could it be that the owners aren't too optimistic about the future, and want to cash in while the going's good?

Excellent point, and worrisome indeed.

Re:I always feared the day they'd IPO!

[axiom9]

Geeks still have an interest in ensuring the long term future of their stuff though. I'll spend extra money just to make sure my Commodore is extra clean and shiny. Google may not be able to afford to do this even if geeks own the mofo.

Re:I always feared the day they'd IPO!

[seschmi]

It's only contradictory on first sight. Actually, investors in publicly traded companies are quite nearsighted, because they can sell their shares every time they want. What they are looking for is an abrupt raise of the share price, no matter what comes after this, because they will sell their shares at the maximum price anyway.

Investors in private companies can't act this way. They know it will probably take years to sell their shares, or probably they will never sell their share but get their return from the earnings of the company. Therefore they have to be much more farsighted.

Re:I always feared the day they'd IPO!

[GoofyBoy]

>When you're privately-owned, you can be content to simply turn a nice profit every year.

Actually it really depends who already owns the company. If its owned by venture capitalists, then they will not be happy with a steady profit and will shake things up (for better or worse) depending on what they want.

If its just a few people, then you risk stagnation. "It worked before, just keep on doing it." or "I don't like this new fangled way and I don't have to change."

>Get ready for what may be the slow degradation of one of the last "pure" and amazing things on the web .. until the next "pure" and amazing thing pop ups next year. Change happens.

Re:I always feared the day they'd IPO!

[milo_Gwalthny]

why do they want to float?

Because they have investors. Investors are interested in getting their money back, plus some. If the shares aren't registered, they can't sell them for a decent price in a reasonable period of time (reasonable here meaning within the ten-year life of most venture funds.)

Venture backers of Google include Kleiner Perkins and Sequoia. These VCs desperately need a win in their portfolios right now. They've held the investment for over four years, and even if an IPO was announced tomorrow, they wouldn't be able to distribute their shares for close to a year (given the lead time of filing with the SEC, getting the IPO done and then the time large investors are usually required to hold the shares post-IPO.)

For instance, from Google's website:

"John Doerr, Kleiner Perkins Caufield & Byers

John Doerr serves on the privately held company boards of Google, Good Technology, Elance and MyCFO. He also serves on the board of directors of Intuit, Amazon.com, Homestore.com, Martha Stewart Living Omnimedia, Handspring, Freemarkets and Sun Microsystems."

This guy desperately needs a win if he is going to live up to his self-created hype from the late 90s. Think of how depressing it would be to be on the boards of Homestore, Martha Stewart, Handspring and Sun right now.

Re:I always feared the day they'd IPO!

[Scooby Snacks]

Just to pick a nit:

The louder you speak, the more likely you are to be moderated down, unless you're sufficiently interesting to prompt the moderators to let you keep your bonus score. (From the faq of which you speak.)

Also, I can't find it at the moment, but I do recall reading in the FAQ that complaints about moderation are basically always Off-topic.

Re:I always feared the day they'd IPO!

[millette]

Yeah, I was waiting for your message. I feel like a pest today - oh well.

Now I can shut up and go to sleep, thanks :)

Re:I always feared the day they'd IPO!

[valmont]

ok ok u guys need to chill out. just because google goes IPO does not mean they have to give a shit about their stock price. After all, they do make plenty of money on their own, what they get on the stock market will be nice gravy. They could very easily tell investors "this is our vision, take it or leave it, if you don't like it, u may suck our collective cocks".

Re:I always feared the day they'd IPO!

[odin53]

You're right about everything but one point: John Doerr is one of the most respected VCs in the Valley BECAUSE of those public company hits. VCs cash out as soon as they can after the IPO (or other cash-out event), and Doerr made KPCB insane amounts of money on Homestore, etc. It may be depressing to own stock (or, frankly, be on the boards) of those companies now, but as far as the VC fund is concerned, they were out a long time ago and did very well. That's the whole point of venture capital, and that's the measure of VC success.

Re:I always feared the day they'd IPO!

[milo_Gwalthny]

Doerr was one of the most respected VCs. Notice how now the only public face they push is Vinod Khosla? When it comes to making money, it's always what have you done for me lately. Making money back in '99 doesn't count anymore.

But the pricetag...

[ben_of_copenhagen]

The Reg carries the story here. Says the company has an estimated value of 15-25 billion $.

I know they make money, but it still seems absurd in an e-world where companies rise and fall in just a few years.
I think i'll buy art instead. Its certainly more fun than shares...

Cash is good but it's not everything

[Pan T. Hose]

"The article points out that auctioning it could bring in a larger chunk of cash for the company."

And what's in my opinion much more important than the cash for the company is a higher level of transparency to the public.

"Would you bid on a piece of Google?"

Of course I would. This is great news (even if not actually "new" to anyone already doing business with Google).

I'd buy, but not in an auction

[merryprankster]

Every day punters are likely to want a piece of Google in a big way. The global reach of the brand and the sentimentality with which the everday web user regards it mean that folks are likely to think that it is worth investing in. But this is where where the auction model completely falls down.

The article states that the price could get pushed up as high as $100 billion in an auction - for a company that makes $150 million a year??! This is complete .con madness.

Google directors get to save a small percentage of the billions they are going to make by skipping on underwriting charges, but the potential for the price being pushed to an artificial high in a auction before a catastrophic crash are large.

Re:I'd buy, but not in an auction

[fbg111]

The article states that the price could get pushed up as high as $100 billion in an auction - for a company that makes $150 million a year??! This is complete .con madness.

Yes, so maybe it will actually force investors to base their bids on an objective standard of value for Google. In fact, I don't see how it couldn't. Average Joe investors will want to bid, but investment banks and mutual funds will be able to out-bid them. But how high are the financial institutions willing to push the price, since they know that in this case their newly purchased shares won't be so easy to "flip" if they've pushed the price too high? The IPO value of Google shares may not go as high as everyone expects in a public auction, as there seems to be more incentive for the buyers to bid rationally.

Re:I'd buy, but not in an auction

[TopShelf]

The point, however, is that the investment banks and mutual funds would presumably place a "realistic" value on Google shares, but the Average Joe would not, bidding shares up higher based on emotion, .com madness, or whatever. It would take a pretty widespread overestimation of Google's prospects to get that crazy a valuation right out of the gate, but it's not like we haven't seen that before...

Re:I'd buy, but not in an auction

[Kevin Stevens]

Google directors get to save a small percentage of the billions they are going to make by skipping on underwriting charges, but the potential for the price being pushed to an artificial high in a auction before a catastrophic crash are large.

I am fairly new to the finance field, but the way IPO's generally work as I understand it is that the underwriting investment banking firm tries to define a target price for the stock, and then buys the stocks for that price minus a spread that serves as the underwriter's fee. The underwriter then resells those shares to the market, taking the risk that there may not be enough demand. However, in the .com case, where a company shoots up to $100+ dollars a share, the issuing company itself does not see the bulk of the wealth, the underwriting firm does. Of course, the issuing company still holds (hopefully) a very substantial number of shares its own stock, so they too get a piece of the paper wealth, as well as cash equal to the number of shares offered * initial price. Its the underwriters who can really make out on the deal, as long as they still hold some shares before the price goes through the roof. So... in doing a direct auction, they save the underwriter's fee (which is not small, or else JP Morgan, Goldman Sach's etc... would not have towering skyscrapers on wall st. ) but more importantly can hopefully get a piece of some of those skyrocketing prices. This also allows the little guy a better chance to get in on the action. IPO's are generally sold off to mutual funds and other institutional investors, and individuals get essentially no chance to get in. Direct auctioning can also give everyone a fairer chance.

Re:I'd buy, but not in an auction

[Anonymous Coward]

The article states that the price could get pushed up as high as $100 billion in an auction - for a company that makes $150 million a year??! This is complete .con madness.

Nonsense. It is a P/E of 667. Quite reasonable.

(yes that was sarcasm)

Re:I'd buy, but not in an auction

[axlrosen]

"I'd buy, but not in an auction." Huh - does that make any sense? You're saying that you'd buy at a price that someone else determined, but not at a price that you determined.

Put in a bid for what you think is a reasonable price. If the price goes too high, then you won't get any shares, that's fine. If it doesn't, then you get to buy shares at a price that's not overvalued (according to you).

Re:I'd buy, but not in an auction

[nelsonal]

The only difference between this and the regular IPO market, where average Joe's bid prices into stratospheric heights, is that Google gets to sell the stock to the average Joes, instead of friends of the investment bankers, who bought the stock from Google at the "realistic" value.

Re:I'd buy, but not in an auction

[nelsonal]

Usually the underwriter places most of the IPO shares in the hands of valued clients at the issue price, which is set prior to trading and is usually the spread that the underwriting firm makes. This is the very low price that the stock starts to trade at, at which point the first market makers (or specialist) set the prices based on orders. Most of the time, early investors hold the shares (and record a paper gain), it is rare for a company to own it's own stock that early in the game. Underwriting fees have been as high as 6% of the deal, (it's in the prospectus). I don't think it's well reported how often, or how large of a position the bank keeps of any deals, but there are exchange regulations on how many shareholders must be in a company so the bank has to give some stock to others. IPOs shares are also given to former banking clients, as well as other particularly big or big fee generating clients. I know Ebbers got IPO shares, with all his debt offerings, he made decisions that allocated millions of dollars in fees.

Re:I'd buy, but not in an auction

[TopShelf]

Right - take today's IPO for Carter Holdings, the maker of infant and toddler clothing, which is a good example of what we're talking about. Their IPO of 6.25 million shares was priced at $19 this morning, netting $118.75 million, but the market took it up over the $24 mark by midday. That gap of roughly $30 million represents the opportunity that an auction IPO tries to take advantage of. Under today's scenario, however, that gap in valuation went to the insiders who received the initial stock allocation then turned a quick profit on today's trading...

Re:I'd buy, but not in an auction

[UnanimousCoward]

...the price could get pushed up as high as $100 billion in an auction...

The person who surfaced the $100B figure doesn't understand OpenIPO from WHR. There's no way that the price would be set that high even if Google could allocate all their shares at that valuation. It would be set significantly lower, more in line with (but, of course, higher than) the expectations of growth and earnings, probably in the upper range of the $15B to $25B that has been thrown around.

who want's a piece?

[millette]

First, some hype:

• "They could get a $100bn" stock market value, said one person involved.
• "It will be worth $15bn-$25bn," said one person who has been involved in the process. "This has never happened before."

Next, more hype:

Though the company does not disclose financial information, its profits are growing rapidly and are reckoned to be running at an annual rate of about $150m on revenues of $500m.

Anybody got a name??

Hell no.

[Anonymous Coward]

I love Google, but I fail to believe it will remain what it is if it goes public. Public companies are responsible to their shareholders, not the users of the Internet.

Re:Hell no.

[Anonymous Coward]

Not only are public companies responsible to their shareholders first and foremost but they can only work in quarterly increments because that's how shareholders will judge them. Yesterday Macromedia dropped 34% after announcing quarterly earnings. Do you think the execs at Macromedia are thinking long term plans at this point, or are they wasting all their time trying to organize a fire sale and save their asses so they can stay on the treadmill?

Maybe not...

[seldolivaw]

Since Google is broken at the moment. I'll see if their search technology can continue to scale...

Re:Maybe not...

[rylin]

Maybe you should check google-watch-watch as well?
Just a thought..

Re:Maybe not...

[PhilHibbs]

Is it still broken? The examples in the slashdot story are all fixed.

Re:Maybe not...

[spoonyfork]

Who watches the watchmen watching the watchmen?

Re:Maybe not...

[rylin]

Ideally, nobody.
Given two sides of an argument, you should be able to come to your own conclusions.

I do agree though that google has been behaving less than perfect for a while, but google-watch is just sort of over-the-top for me..

Sure I would

[__aahlyu4518]

but only on the L or the E.
There are 2 of the G and O, so they'll be less valuable over time.

Unless those disappear one day. But then you ogle :-)

Re:Sure I would

[tommten]

You loose! Cause it all works because of the secret Goo (patent pending)

Re:Sure I would

[Anonymous Coward]

The O is far worse because on any given search there are as many as ten of those, devaluing them even further.

Re:Sure I would

[PhilHibbs]

hey, that's an idea - ogle.com, a search engine dedicated to pr0n!

Re:Sure I would

[transient]

I always thought booble.com was a good name for a pr0n search engine.

Re:Sure I would

[Night Goat]

That really fucked my brain up. I thought you were talking about Legos originally, until I read it a few times. Of course, I was listening to the Butthole Surfers while drunk, also, so there's something right there too. Kudos for flipping my brain in my head!

Apropos?

[the uNF cola]

Strangely enough, google asking for money for an IPO reminds me of the south park episode, with the sucubus and chef's dad.

He says, "And you know what that Loch Ness Monster said? He said, 'I need about tree-fiddy.'"

Maybe that's how much I'd give 'em.. but then they may want another tree fiddy. :\

Interesting, But Not Innovative

[Bloodmoon1]

While interesting, this isn't the first time a company has done this. In April, 1999 a company called Ravenswood sold 1,150,000 shares online in an IPO auction. Several other companies since have, including Salon.com and Andover.net. Here's a summary of how they went.

Re:Interesting, But Not Innovative

[millette]

Thanks for the info.

Mod parent up, please!

Re:Interesting, But Not Innovative

[EinarH]

Andover.net
(OpenIPO auction - completed 12/8/99)

Andover.Net is the leading Linux/Open Source destination on the Internet. Their network of Web sites provides an independent, unbiased source for content, community and commerce for the Linux and, more generally, the Open Source communities.

Results
-4,600,000 shares priced at $18.00 per share
-Filing range increased from $12-$15 to $15-$18
-First day closing price of $63.38

350% on the first day...
Ahh, those were the days.

Re:Interesting, But Not Innovative

[netsharc]

What's with the tombstone posters, I don't get it.

Re:Interesting, But Not Innovative

[nelsonal]

Wall Street is filled with black humor, tombstones are the ads that often appear in the market section of the paper, there is one in the journal almost every day that gives the name of the company announcing the offering* of securities, the lead and other banks taking the company public, and usually the amount of the offering. I found a pretty plane jane example for an Iron Mountain debt offering here. Won't that firm be surpised when they check their logs today. An offering for public securities would have a ton of fine print including this is not an offer to buy or sell securities, and tell you how to find a copy of a prospectus.

Original Financial Times Story

[Anonymous Coward]

Here is the original FT story.

Well who will call the shots?

[Martigan80]

I mean once they offer stock, they are going to have a board right? If that's the case lets hope they don't fall in line with Apple when Steve got fired by the board!

Just a though, they, the owners now, will lose alot of control over google, beside the comitition can buy some and if they get around 10%...oh well let us just wait and see.

Microsoft

[twistedcubic]

Wow! I kinda laughed when I saw the claims about Microsoft's search engine overtaking Google. Now it looks like it will probably happen. Once Google goes public and scares everyone away with lame ads and lame pricing, Microsoft will rule. This is highly unfortunate. I really can't believe it.

Re:Microsoft

[teledyne]

An IPO can also give Microsoft a chance to outbid everyone and effectively purchase the majority of Google's shares. Microsoft will own Google, and hell will freeze over, this time not in Apple's favor.

Re:Microsoft

[leerpm]

If the company really is valued at $15-20 billion, I doubt Microsoft would be willing to part with that much of their cash hoard. Also, it would be considered a hostile takeover, which does not work very well for software companies unless they have reached maturity.

Re:Microsoft

[borgdows]

the differences for the same search term between MSN and Google are TERRIFYING!!

Google search for 'linux'

MSN search for 'linux'

The price of Google...

[eforhan]

...would be a one with one hundred zeros following.

IPO only good for short term

[optisonic]

Google is one of the few companies that regularly and consistently produces USEFUL functions for the world on a large scale. No one competing for the same market segment even comes close at this time.

Unfortunately when companies IPO, that means that they lose control over company direction and quality. As soon as people have a vested interest in the company, the race to profitability is on. This hurts the development cycle and the processes which control the quality of product. Investors are very demanding and GREEDY. Greed always rears its ugly head and forces companies to release more quickly and with lower costs to attain the extreme profitability that is required by the public.

Sure if you buy in then you can get a cash cow and end up sitting pretty for a while. Just know that over time people always want more money faster than it is currently being earned. This results in unrealistic schemes to achieve such goals.

Some would argue that more money means better product, but I know first hand that more money means more greed and investors would rather have money than good product. This means more regular changes internally to keep up with good profitability ratings.

Fortunately others are starting to compete for this space as well and even if Google looses it's cool due to investor demands, others will be ready to seize opportunity for improvement. Too bad it likely won't be the same Google that we (everyone I know) love today.

-BJ

Re:IPO only good for short term

[Anonymous Coward]

Well as fucked up as it is, we can take some solace in the fact that they're not irreplaceable. They're only good as long as they're good. If they blow it, somebody can replace them. Web spiders aren't black magic. Apparently they're the largest individual corporate consumers of hard drives in the world. But in a way that's a handicap because although they're not growing like they used to, they're still dropping the $/GB ratio year by year. I heard that Maxtor is bragging about a 175GB platter. And Seagate is shipping 100GB platters already. And wholesale bandwidth is expensive, but not infinitely so. A competitor could probbly get a good start with a few hundred million just by coming late to the party. There's lots of possibilities to give the next guy a boost if Google gets too commercial. Fast, low power processors certainly wouldn't hurt and there have been some real amazing technical advances in this area. If you're running thousands of servers that could be a major advantage. So, let's hope things stay cool with Google, but if they don't --fuck 'em. No need to get sentimental over sell-out punks if that's how they want to go.

Re:IPO only good for short term

[blizzardsoup]

Just because Google is privately held does not mean that they do not have investors. From Google's own site:

Google is a privately held company with primary financial backing from Kleiner Perkins Caufield & Byers and Sequoia Capital, which together led an equity round of $25 million in June 1999. Google also has benefited from several other high-profile investors, including Stanford University, Andy Bechtolsheim (co-founder of Sun Microsystems and current vice president of engineering of the Gigabit Switching Group at Cisco Systems), and Ram Shriram, an entrepreneur who previously held senior executive positions at Netscape, Junglee and Amazon.com.

I've worked for several VC funded private firms and the VCs all demanded a ROI. VCs can be just as GREEDY and unreasonable in making demands to become profitable as the unwashed masses trading common stock on NASDAQ

Re:IPO only good for short term

[tarm]

This is probably why they want to do it this way. If they did a traditional IPO, it would be mainly investment companies who want profit and ROI. By doing it this way, they might hope to interest other stakeholders not just shareholders. I.e. techies might buy shares and NOT demand the ROI that an investment firm might, because we appreciate the qualtiy of google.

Millennium Mercantile

[Doc Ruby]

I'd like to see Google experiment with auctioning higher ranking slots in their search results. When it takes off, I'll wait for hedge funds to trade shares of NASDAQ, Inc. in the NASDAQ market. Rotating in board members more favorable to this week's Enron cryptosubsidiary issue will make us all rich.

Noooooo!

[adrianbaugh]

Don't do it google! Sure, you'll get a bit of cash but you'll be selling your soul. Once you're in public ownership the only thing that is allowed to matter is shareholder returns, which will inevitably mean you turn into some sucky kind of portal with online shopping, instant messaging and all the crap I don't want from a search engine. This will happen regardless of whether the current people want it to or not - they'll just be voted out at an AGM, or sued for failing to maximise shareholder value.
So: google, consider this a plea. Remain smaller than you undoubtedly could become through an IPO, but retain your integrity and the essence that makes you great.

Re:Noooooo!

[Anonymous Coward]

So google will then be like this site?

Re:Noooooo!

[Anonymous Coward]

Dear Mr. Baugh;

It's a good thing you got to us in time! We were just reading slashdot and were unaware of the long-term pitfalls of going public. We are in your debt for your wise fiscal advice. Please accept this t-shirt as a token of our gratitude. In addition, all your searches for the next month will be absolutely free.

Sincerely,

Google

Me neither....

[Anonymous Coward]

But nothing wrong with looking at, ooooh, say this.

Re:Me neither....

[Anonymous Coward]

Most normal Google results look like a Froogle excerpt these days, and Google didn't have to lift a finger to achieve that.

I seem to be missing something...

[theGreater]

"However, all the shares would end up with Aunt Agatha in Des Moines and Uncle Milt in Pittsburgh and there would be no real public market at all."

I'm not too investment savvy, but isn't this EXACTLY what a public market means? Public, as in The Public; and Market, as in a place to buy and sell?

It -sounds- like he's saying that he's worried about the Public actually using their purchasing power. God forbid we take the future of something we value out of the hands of the people who brought us Enron, Worldcom, and other such unmitigated disasters.

-theGreater.

Re:I seem to be missing something...

[jjo]

No, you don't really understand the Investment Banker's point. The point of an IPO is not, as is often believed, to raise capital for the company. The point of an IPO is to create a 'public market' where Investment Bankers can make big profits. The idea that a company could raise capital without paying a tithe to Wall Street is simply un-American.

Start a petition

[Anonymous Coward]

We should really start a petition. You know, if we start now, there might just be a chance that Google will cancel its IPO, if we can convince them that this will do no good to their service.
So, anyone up to it?

Sure they'll get more money. . .

[Fritz Benwalla]

Of course they'll make more money with a Google-run auction:

"I bid twenty dollars per share"

Did you mean: thirty dollars per share?

Financials

[nuggz]

Of course not.
I haven't seen any financials.

Will the company change if it goes public?
If it isn't the google of today and becomes a crappy add loaded POS, it isn't the google cash machine I think it should be.

Assuming google is profitable now, just keep providing a class leading product, improve it so that there is no effective competition.
Should be capable of consistent profitability for the long term.

maybe...

[orion67]

will they accept PayPal?

how about if I trade my mint Mickey Mantle rookie card for some shares?

Oh no...

[Universal Nerd]

Forseenable, but I don't like the idea so I'll go looking for alternatives as "cool" and "IPO" are two words that don't mix.

Are there any good search engines out there as Google is about to go down the drain in a bubble of hype?

why exactly IPO=Death?

[23]

So what exactly would magically change, if their shares were publicly traded as opposed to being held privately by quite a bunch of VC's ???

Personally, I don't buy all this hipocrisy outside money supposedly destroying the company. Google would probably be long overtaken by some other company had it not gotten outside capital to fund growth and we would not have one of the coolest web-services around.

And although the dot.com-boom is over, the fundemental paradigm of web-services still exists: practically no barrier to entry. So if google dies (which I don't expect), another better search engine will take its place. That is the cherrished capitalism for you. :-)

OTOH, if they can use the money to expand their business (and reap some rewards for their cool work), I'm all for it. In the end it's and always has been a business decision.

cheers,
Roland

Depends on Price

[Gavin Miller]

Depending on price, yes I would buy a piece of google as long as it wasnt too expensive.

M$ Google

[rootguy]

Hey, don't spread this news around, M$ might just buy it all... And in some year you'll be reading Google's EULA and paying for each one of your queries... I wonder what would be Google's performance running on Win2k3 :P

A Fool and His Money . . .

[Anonymous Coward]

I got Enron shares 4 U

. . . CHEAP !!! ;-P

Good way to get cash

[yaff]

Nice idea. Now that everyone's IPO wary they'll just label it an auction and drum up even more than the usual hype. From a moneymonger standpoint it's a great idea. It might even look like Y2K again, if only for a few days.

No, I wouldn't buy Google at auction. Its known by way too many excitable people with a credit card and a PayPal account. Or maybe Google will stiff PayPal and make you send them a cashier's check via Western Union.

morons score covetdead mynuts won: undefined

[Anonymous Coward]

'selling' your co. to the public without the hostage mandates of BearonStearno, GoldMineSacks, the Rothchilds, the gates, & the other felonious stock markup execrable, may prove difficult/meet resistance from the whoreabull gangsters of wall street of deceit, but could possibly change everything, again.

as we know, the daze of the phonIE ?pr? ?firm? scriptdead georgewellian fuddite payper liesense softwar gangster stock markup fraud execrable billyonerrors, is WANing into coolapps/the abyss, at the speed of right.

seems to us, that coughing up dough for a search engine co., would be like some loan that should be repaid with interest, as opposed to some pyramid payper 'stock' (yet another nearly ruined word, tell 'em robbIE?) scheme, that leaves the public betting against one another, causing even more hysterical 'momeNTdumb'.

the lights are coming up now.

consult with/trust in yOUR creator..... that's the spirit.

don't forget to visit the foundation of fear, uncertainty, & doubt: http://www.trustworthycomputing.com

Re:morons score covetdead mynuts won: undefined

[Bertie]

Blimey. Stanley Unwin isn't dead after all.

Great idea

[andih8u]

After all, going public did wonders for Yahoo, right? I'm fearing the day that the Google homepage will look like Yahoo's. Yahoo has 3,413 characters of text on the frontpage, quite a bit of which is ads, while Google has 199. I know that google is sensitive about this, but when you sell stock and have investors calling the shots on what you do, you lose your say in the matter.

Re:Great idea

[AFuckingCookie]

yahoo = portal
google = search engine

it's to be expected that yahoo will have more links on the front page. the ads, however, are another story.

No not initially

[Anonymous Coward]

From a financial standpoint, purchasing google at auction would be only sane if one wanted the novelty of owning the stock.

The structure of the stock market is such that the best price to be offered will be offered. The value of the stock is contingent upon many factors, one of which is how much of the company does your one share actually entail you to have. For instance, if you purchased one share out of a possible 100, then that one share would be clearly worth the price. On the other hand, one share out of a googel, is clearly not worth it.

Google is hoping that the profits that are usually made by traders on an IPO openning will be made by Google itself.

Have Gone As Far As They Can Go

[Anonymous Coward]

My guess is that they're considering an IPO because they've taken search technology about as far as they can. Others (such as Microsoft) will catch up to them soon, at which point their company will become worthless. People are mistakenly assuming that just because something is well-designed, visually-pleasing, accurate, intuitive, etc., etc., etc., that money can be made from it.

I want it NOW

[wowbagger]

I want it NOW

This is not a reference to the Google stock, but rather to the pervasive attitude in today's society that is leading to our downfall as a civilization.

I want it NOW - as in, "I am unwilling to wait, and do the sensible thing, so I will do something completely stupid to get this right now."

Rather than waiting to earn and save enough money to buy (that plasma display|that new video card|that big SUV|...) people just charge it on the ol' credit card. Result - most of their income goes to servicing their debt.

Companies are like this, as well. Rather than borrowing money from a bank, or folding some profits back into R&D, they look for the immediate solution - "Let's sell off part of the company!" Unfortunately, unlike a bank debt which is designed to go away after a time (when you pay it off), selling off part of the company as stock is almost impossible to reverse. True, a company can try to buy back the outstanding shares, but as they do so, the cost of the outstanding shares will rise, and they are unlikely to ever be able to buy them back.

And I am sorry, but any employee who is swayed by stock options IS A TOTAL FSCKING MORON. The only way stock options are valuable is if the stock price of the company significantly increases from the time the options are granted to the time they are vested. As other posters have pointed out, this leads to a company trying to grow continuously, which is simply not possible. As a result, eventually you will get stock options that don't significantly appreciate in value.

There are better ways to "incentivize" an employee (that was the very term that was used by my boss as I was offered stock options - which were so far under water when the company was bought out that I was offered one whole dollar for the lot). A profit sharing plan, in which a percentage of the company's profits are credited to an account in the employee's name, with a vesting period, is FAR MORE effective at giving a key employee a reason to stay than stock options - the employee can SEE the value, can SEE the exact amounts of money he is walking away from, and that value DOES NOT FLUCTUATE as the market varies - hence the employee is unlikely to walk away at an uptick, as upticks and downturns simply don't happen.

Lastly, the whole purpose of playing the stock market has changed. It used to be a means by which you invested you money in a stock in return for dividends - converting cash into an annuity, thus attempting to guarantee youself an ongoing income, while still having the money available for use if needed. In that mode, the stock market is a non-zero sum game - you can gain value without somebody else losing value.

But now, the stock market is played like a trading card game - the idea of holding a stock for years is gone, buy it today and sell it tomorrow, lather rinse repeat. When it is played like that, the stock market becomes a zero-sum game - if I make money on the market somebody else had to lose - if I bought it low from you, then you lost your chance to make money, and if I sell high to you, you are losing money to me.

As a result, since in a zero-sum game everybody is in direct competition with everybody else with little motivation to co-operate, you get the "dog-eat-dog" mindset we see today.

No, I hope Google does NOT IPO. Yes, it would be nice to be able to buy a few shares of a well-run company who's management is planning for the long term. However, the odds of Google remaining such a company after IPO are vanishingly small. To paraphrase Marx (Groucho, not Karl) - "I wouldn't want to own stock in a company that would sell it to me."

Re:I want it NOW

[Kevin Stevens]

"And I am sorry, but any employee who is swayed by stock options IS A TOTAL FSCKING MORON. The only way stock options are valuable is if the stock price of the company significantly increases from the time the options are granted to the time they are vested."

Not necessarily true. In general, the idea behind options is to issue them below the current market price, then after a period of a few years, they vest and the employee can cash them in for real stock. So it works even if the company's stock stays even. However, the whole point is for the stock to go up, so everyone is happy. Some have argued that options have reduced the impetus to give back dividends, since options give you the option to buy the price at X price, they dont give you the actual stock, and thus the dividends that go with it- that takes away alot of motivation to give back dividends now, rather than buoy the stock price a bit by adding growth, even if the total return over the long run would be better to shareholders if a dividend was issued- option holders, IE insiders in the company are better off, and they're making the decisions. Additionally, the lack of dividend trend is primarily caused by owners of the company-IE investors, because they are obsessed with growth. In the past it was somewhat acceptable to be happy with your niche, remain profitable in that, and have your investors gain by giving most of the profit back as dividends. Nowadays, a stock's 'score' is mostly reflected in its stock price, and it is hard to make a case for giving money back to shareholders instead of upgrading your infrastructure and technology.

Re:I want it NOW

[Afty0r]

And I am sorry, but any employee who is swayed by stock options IS A TOTAL FSCKING MORON.

Microsoft have more millionaire secretaries and millionaire-ex secrataries than most companies have employees.
Are they all morons?

The only way stock options are valuable is if the stock price of the company significantly increases from the time the options are granted to the time they are vested. As other posters have pointed out, this leads to a company trying to grow continuously, which is simply not possible.

You claim growing continuously is not possible, but we have not established boundaries for the use of the word "continuous" in this context. You claim it is DE FACTO impossible - which is true if we take "continuous" to describe its intended growth INFINITELY.
On the other hand if we talk about continuous as in five years, or ten years, fifty or even a thousand years it is very possible that the company will grow continuously for one or more of these periods.

Stock options are not all worthless, however they are something one should scrutinise before committing to.

Re:I want it NOW

[FreshFunk510]

Just wanted to point one thing out:

And I am sorry, but any employee who is swayed by stock options IS A TOTAL FSCKING MORON. The only way stock options are valuable is if the stock price of the company significantly increases from the time the options are granted to the time they are vested. As other posters have pointed out, this leads to a company trying to grow continuously, which is simply not possible. As a result, eventually you will get stock options that don't significantly appreciate in value.

Absolutely wrong. Look at any blue chip company out there (the IBMs, Coca Colas, Walmarts, Eastman Kodak). These are market veterans who have average their growth probably around 10-15% a year (perhaps a quarter) every year. It is possible to continuously grow (unless you take it to infinity but last I checked we weren't that close :).

And, it's simple. They grow by increasing market share through acquisition (Peoplesoft buys JD Edwards, Coca Cola owns most all of popular Soda, Microsoft buys Great Plains), diversification (Johnson and Johnson makes every household supply from soap to cleaners), or a complete shift in markets (BMW and Mercedes initially made planes for wars and now they solely make cars).

So it IS possible to continuously grow. It's not possible to grow at the rates they do initially and most exciting companies probably grow on a log scale but it's possible.

Re:I want it NOW

[Anonymous Coward]

I know my kind of reply is considered redundant and useless, but f*ck the moderators, I have to say this:

I totally, 100%, agree with you. What you're saying is wisdom. I wish more people saw the light. If more people would think this way, we wouldn't be in a shit-hole dog-eat-dog society as we are today.

Let's hope this trend toward wisdom continues. Maybe some day, profit will not the the sole reason to start a company, and some day, how much money you have will not determine your worth as an individual.

The "up, up, up, up, up forever..." mentality is a nightmare from which we need to wake up. Stock market has been a joke for many years (decades?) now. I'm shocked it's not shut down by the government yet, as it is a source of scams, harmful speculation and so on, and is not a source of an honest income. (yea I know, a thousand people will jump up and rationalize how it is an honest income)

Last Minute

[Tetsugaku-San]

Looks like another www.lastminute.com fiasco in the making to me . . . . Roll Up, Roll Up to looooose ur cash :)

IPO?!?

[Art_XIV]

IPO?!?!

Here come the MBA's... There goes Google. :/

I want to *BUY* my shares...

[Anonymous Coward]

... as it is I hate going to e-bay to buy anything. There's always some dumbass that creeps in at the last moment dropping a bogus bid on top of yours that either results in you paying a buttload more than you should have to, or the guy winning for like a buck more than your highest bid. For a buck more I would have always outbid that. Bottom line, you bid an amount, you should PAY that amount.

What is a reasonable price even going to be per share?

Re:I want to *BUY* my shares...

[AFuckingCookie]

but a buck more is a buck more than you wanted to pay, yes?

it's not difficult to buy stuff on e-bay. put the absolute highest price you'll pay as your bid, and then ignore it until the end.

if someone comes in at the last second and bids a buck higher than you, oh well, because you already decided you weren't willing to pay that extra buck.

What kind of auction will it be?

[Anonymous Coward]

Im hopping that it will be dutch, with the lowest bid being the price of the stock!

The stockmarket is like an auction anyway

[Maset]

As stated in the article, instead of letting the investment banks and their favoured customers buy at 1 and sell at 10 in the first 10 minutes of listing it will allow everyone to buy at 8 (or some other >1 made up number).

The possibility of people bidding too much is the same as the risk that people will rush in after missing out on the IPO and bid too much on the stock market.

End of google

[Peyote Pekka]

Didn't we learn anything from the '90s?

Yes. We learned that going IPO is a way of saying, "We'd like you to pay us to drop our core competencies out the window."

As far as stockmarket gambling goes it will be as good an investment as any other flash-in-the-pan dot-com. In the short term, perhaps it is better than other pyramid *cough*MSFT*cough* schemes. However, beyond the short term, it means that the techincial developments is no longer a priority and the company won't be around much longer than it takes to gracefully wind down or liquidate.

Re:End of google

[Anonymous Coward]

MSFT is a pyramind scheme now? Hey, I bet they want to kill the Florida coma woman too!

Re:End of google

[Anonymous Coward]

Well, they did kidnap the Lindbergh baby. Didn't they?

Didn't they!?

i'd rather buy direct from google

[*weasel]

... particularly after reading what those offering-banks were doing during the boom.

Not only were investors dumb with their money, but there was a sea of illegal under-the-table action building up those numbers.

Recap: When Amazon does an IPO, they get a bank to handle the deal. That bank first sells shares in large chunks to other very large banks, who then sell to other less-large banks, who then sell to you and me.

Brokers at the offering bank would cut deals with would-be 1st tier purchasers, offering them a chunk of shares for a good price, but only if they agreed to buy more shares at the inflated price (illegal) - further inflating the perceived value (if you see smith barney still buying a .com with no revenue at $20/share, one normally assumes they know something you don't).

The would-be purchasers wouldn't want to back out on the deal, after the good price, or else they'd be cut off from getting in early on other IPOs offered by that bank. (few banks actually do IPOs) Similarly, they sure wouldn't want to take a hit for their own company (it'd be their ass) if that second block of shares turned out to be overvalued - so they gussied up their forecasts to convince other investors that a company really -was- worth the secondary inflated price (illegal).

They made millions on everyone else losing billions.

Given that, if Google does their own IPO straight-to-the-people, day-traders and herd mentality could easily drive the prices up to bubble-era prices. Of course, on the other hand, it's much less likely that there's shady deals going on.

Though I'd imagine they'd only sell a small block of shares that way. One doesn't usually turn away a billion dollar brokerage firm who wishes to purchase in significant quantities.

This is terrible news

[ShortedOut]

Google isn't as effective today as it was a year ago today. Their searches are screwed up with innane irrelivant material.

Couple that with an IPO auction, and soon, we'll need to be a subscriber for "premium" features on Google, such as the ability to put an "and" in your search, or post on the Google "forums" where you can chat with your friends about how great Google is.

In my opinion, IPO doesn't mean better at all.

Re:This is terrible news

[Mwongozi]

such as the ability to put an "and" in your search

Eh?

Search for Black and White.

Or did you mean a logical "and"? Google does this by default, including all words in a search.

Re:morons opposing frauduleNT corepirate nazis?

[Anonymous Coward]

Marry me.

Now is not the time

[gsdali]

Google's key user service (not it's key revenue earning service) is the search engine and right now its broken. it doesn't work like it used to, it hasn't worked out how to over come link farms and trackbacks. Sure its got a work round but the search engine does not work well any more. it could be overhauled in effectiveness by another team of students with a clever idea (I'm sure somebody is working on it), that's what happened to altavista etc.

Sure, google could buy up such a company but so could M$ ($ very appropriate here) or anyone else. People will use the best search technology. google makes its money through advertising, but are people going to advertise with number 2, even adwords will loose its cachet. Money also flows from licensing its search services, but who's going to buy number 2.

Google needs to sort out the technology before it floats. Maybe they have something up their sleeves, but we shall see.

I think hype is going to overturn caution and google will end up over-valued. Without improvements in the technology, realised or forthcoming (in a non vapourous way), the shares will not be worth the premium.

What if it goes for $10?

[192939495969798999]

What if google's auction goes for $10? Someone could make a deal with eBay to rig the auction... sounds like a bad idea to me.

I won't fund evil

[Anonymous Coward]

I won't buy a piece of an evil company.

My vote

[localman]

It's been said elsewhere on this thread, but an IPO will turn Google into a short-term profit chasing company. It will destroy their R&D work and they will no longer be able to make decisions for the benefit of their users. Watch for obnoxious (and less effective) advertising. Watch for pay for placement. Watch for the killing of the goose that laid the golden egg.

Ask the (ex)president of any good customer focused company that went IPO more than a few years ago. After a brief thrill the fun will be over. Their "value" will shoot up, bringing about a great feeling of success. Then features will slowly be reduced. Then they'll find ways to milk more money out of their customers. From every metric aside from market capitalization they will have failed.

And Google -- perhaps the greatest commercial tool on the internet -- will be no more.

So, here's my vote. As a non-stock owning USER of Google, as someone who has spent money on thier excellent advertising, and who has clicked through on their ads I vote that Google does not go public.

Cheers.

You couldn't pay me to touch the markets

[Anonymous Coward]

After being a victim (like many others) of the sharp decline of the markets and watching how quickly people would panic and sell (like a flock of sheep); how people would sell short and hope for companies to fail; or watching stock go down -even though- the company turned a profit - dividends, I was left with one conclusion:

You have better odds at a casino. At least it doesn't pretend to be something other than it is -you know you're gambling - whereas the markets have analysts, forecasts, etc. to dress it all up.
A notch up from horse-racing with all the stats, but the end-result is about the same as throwing a coin into a slot machine.

Personally, I have never seen anything more vile and disgusting than the markets. They are the epitome of Greed. Read various investor forums to see what I mean.

My advice to Google: stay private and answer to no one.

Sorry for the rant, much better now.

Good Tyrant Bad Democracy

[Epistax]

That is to say, being lead by a few with vision is better for google than those that want to make money off of it. Why do I feel like the front page of google will suddenly look like yahoo.com? Who doesn't want an email@google.com? They'll start selling those out. How about hosting some webspace? A company-only pay-to-be-on-search engine?

No. The fact is that with these kinds of things, the dream dies with the creator and product soon fails after. Now the google guy(s) aren't dead yet but this pretty much removes them from the picture. If this happens then in a couple years there won't be a single search engine worth my time. I hope you enjoy your googleweather forecost, you're googlemochalatte, and perhaps your google-register-to-view articles.

Deja Vu?

[plasticmillion]

The interesting thing about this story is not the potentially bloated valuation that Google will aim for. Did you think that people learn from their mistakes? Come on, now! The Google founders have the right to be billionaires too, dammit. Much more relevant is the idea of using an online auction for the IPO. I guess this is common knowledge, but generally IPOs go through an investment bank like Goldman Sachs or Morgan Stanley, who feed the IPO shares to their valued customers for some artificially low price. Everyone makes money... unless, that is, you're not already rich.

I've felt for a long time that this is an affront to capitalism (yeah, I'm a capitalist... go ahead and mod me down). The only people who make big money did essentially nothing to earn it, besides the company founders who took big risk and make less than they could since the banks keep the price down to make sure they sell the whole float.

At the same time, we've been here before, as this Forbes article from early 2001 describes. Earlier efforts to make IPOs more efficient and democratic failed. It's not clear to me whether this was due to the coincidental collapse of the tech IPO market, or whether it was the result of a coordinate sabotage effort by the big investment banks. (Or maybe, just maybe those banks really do add some value by getting their big customers to serve as market makers).

Google has about as much market clout as I can imagine, so if they decide to go for it, this will serve as a good acid test. If the IPO goes off successfully as an online auction, this probably means that the earlier efforts were just bad timing. If it fails, I might smell a conspiracy.

Re:Deja Vu?

[Anonymous Coward]

The only people who make big money did essentially nothing to earn it

Woah! Hold on a second :) If this bothers you, you should rethink your position as a "capitalist" -- it is the fundamental concept that the system embodies.

Buyout Sniper

[nukeade]

So, you think we can beat Microsoft to buying out Google with a "last-minute snipe"?

~Ben

I would bid!

[louissypher]

$8 dollars and a candy bar.

IPO 101 Lesson

[blizzardsoup]

To those who think that Google will turn into a mindless profit-driven machine once it IPOs, here is the current board of directors for Google Inc.

• Dr. Eric E. Schmidt, Google Inc. Chairman of the Board
• Sergey Brin, Google Inc.
• Larry Page, Google Inc.
• John Doerr, Kleiner Perkins Caufield & Byers
• Michael Moritz, Sequoia Capital
• Ram Shriram, private investor

The sole reason that Kleiner Perkins, Sequoia, and Mr. Shriram are represented on the board is that they invested millions in Google. I sincerely doubt that they do not want a return on that investment (especially with the millions they likely lost when the bubble burst). Google had already sold out long ago.

Not that wanting an ROI is a bad thing (that is what make the US economy great). But assuming that a privately held company is any more or less profit driven than a publically held one is a very bad assumption indeed.

Re:IPO 101 Lesson

[sql*kitten]

The sole reason that Kleiner Perkins, Sequoia, and Mr. Shriram are represented on the board is that they invested millions in Google.

The career of Dr Schmidt is interesting too - for a couple of decades he's essentially been the bagman for KPCB, the VC firm that employs Mr Doerr. They dispatch him to take charge of anything they're particularly interested in until they cash out, then he moves on. Not that that is a bad thing or any criticism of either of them - but it is worth pointing out that the VCs have a clear majority on Google's board.

Google's Motivations

[kallistiblue]

I'm intrigued that google is still interestted in going public. Being a public company means that google will be working for the investors rather than doing what google does best.
My guess is that they:
1.go public
2. gets lots of cash
3. Buy back company and privitize after price comes back down.

I also think that google is using the muscle to hopefully make some good changes to Wall Street.
Even when things were good in '97 and '98, Wall Street's actions always looked criminal to me.

Wall Street consistantly ended up giving companies going public only a fraction of the price that the company closed at after the first day of trading.
Why is this a problem?
Well a company going public is essentially selling a % of their company to raise capital.
Let's say we have a company that we are willing to sell 20% to raise $20 million.
To do that, I have to sell 2 million shares at $10 a share.
If the stock closes at $20 at the end of the first day, as the IPO'd company we still only raised $20 million dollars.
If the I-bankers did their job correctly, we could have only sold 10% of the company and still raised the same amount of cash ( $20 million ). Instead, we were forced to sell 2x as much ownership of the company as we should have.

The investment banks pocketed all the additional money. The most common structure of an IPO is that the underwriters purchase all the stock from the IPO company and then sell it from their books as trading occurs.

As I understand it, the biggest task a IPO underwriter performs is evaluating what a share of a stock will trade for in the market. If you look at their historical accuracy of doing this, you'll see how poor a job they do at this.

Why does Wall Street still exist?
Legislation

Look at the effeciency of NYSE vs Nasdaq. No comparison.

Re:Google's Motivations

[sql*kitten]

Being a public company means that google will be working for the investors rather than doing what google does best.

Umm, who do you think Google is working for now, if not its investors?

Buy the auctioneer

[zaphod_es]

Buy shares in Google? That is insane! Buy into eBay if that is the future of IPOs. I wonder if I can pay via Paypal.

we go to the stock exchange?

[Anonymous Coward]

If google can flog their stock on the web via an auction, they presumably have the technical nous to set up a trading system. What's the point of the stock exchange, extra costs, market makers...? They have the brand to do it on their own, and it really would be far more ground breaking to do it sans exchange. Could even form the basis for a serious and credible challenge to eBay. You never know.

Nobody learned anything from the 90s

[sdcharle]

Between the NASDAQ run-up and the staggeringly high (higher than during the last bubble) level of margin debt (borrowing to invest), it is clear the 'sucker class' of investors is alive and well and beggin' to be used and abused some more...

Elitist Corporate Crap

[avi4now]

At the bottom of the article:

"They could get a $100bn" stock market value, said one person involved.
"However, all the shares would end up with Aunt Agatha in Des Moines and Uncle Milt in Pittsburgh and there would be no real public market at all."

What the hell? This anonymous coward is a real elitist! Aren't private individuals exactly who comprise the "public"? The first four definitions of "public" from dictionary.com::

1. Of, concerning, or affecting the community or the people: the public good.
2. Maintained for or used by the people or community: a public park.
3. Capitalized in shares of stock that can be traded on the open market: a public company.
4. Participated in or attended by the people or community: "Opinions are formed in a process of open discussion and public debate" (Hannah Arendt)

The community or the people. Not the rich or the powerful or the corporate or corrupt.

This kind of attitude is indicative of a major cultural and societal problem: the idea that individuals are somehow not worthy, that they're dumb or inconsequential somehow. That only the interests and concerns of the rich, the powerful, the famous, or the corporate really matter.

This makes me sad and angry.

Warning to moderators! About Everyman.

[hkmwbz]

(I know I may burn some karma on this, but it is worth it if I can contribute to putting an end to Everyman's lies about Google.)

Warning: Before modding the parent post, you should know that "Everyman" is the Slashdot alias of Mr. Daniel Brandt, who owns google-watch.org.

I have pointed out many times that google-watch.org is a site full of lies and deception. The reason the site was set up in the first place was that Mr. Brandt didn't think that he got a high enough PageRank, and that his obscure pages about various subjects should rank above other, more informative and popular sources of information on the same subjects. When his obscure site with a page about Donald Rumsfeld did not get a high rank on Google for obvious reasons, he set out on a personal vendetta against the search engine.

In other words, he is not making that site for the good of us all, but to spread FUD about Google. It is a good thing to keep an eye on powerful companies, but this is over the top - it is ridiculous.

Before falling for Brandt's lies and deceptions, please visit Google-watch-watch.org, which exposes his misleading site for what it is.

This latest post on Slashdot is just the latest post in the series of strawman arguments Mr. Brandt is using to try to destroy Google. Also, he still hasn't answered my last reply to him, where I pointed out his hypocrisy, when he complains about how Salon writes a misleading article about him (yeah, right...).

Maybe a short...

[TamMan2000]

As for the auction, the poster is absolutely correct: it's likely to suffer from the 'winner's curse.' The shares will be sold to the bidders with the very highest expectations for the stock value, making it unlikely that there will be a pool of even more bullish investors around to push the value of the stock higher in the future.

Not only that, but the vast majority of IPO's come back down rather substantially right after the initial ride up (and then either go up again, or bomb completely...), here is one example I read an article about this (I think it was on the fool but I can't find it now). If I was more of a risk taker, I would consider a short position on this one right after the trading starts...

I'll buy!

[Anonymous Coward]

I'm spending all my money on Google stock. Buying stock at auction for the highest possible price is a great deal! Also, stocks never go down! They are magical and you make lots of money, with no risk, so invest all your money now. If not in Google, then in some other stock. Do it now!

Get real, slashdotters.

[Anonymous Coward]

Welcome to the world of economics. Despite the nostalgic views about Google and their selfless toil for the good of mankind, they are after all, a company whose purpose, among other things, is to make money. During better economic times, companies DO go public--remember?
I'm surprised at the utopian undercurrent in a many of these posts. Sure, greed motivates some shareholders, just as it motivates some privately held corporate executives. Why is Google any less entitled to the dream of going public than any other successful company?
I think there are at least a *couple* of publicly held companies who can still innovate, no??

Bye-bye, Google.

[Anonymous Coward]

Been nice knowing you. When the sociopathic "shareholder value" system takes over, you'll be unrecognizable within a a year or so.

Very sad.

What's the point? There are better ways

[Brian Stretch]

If Google needs to raise capital to buy capital equipment (more server farms, etc) they otherwise wouldn't be able to pay for, OK. If they need the money to hire people they don't currently have the cash to hire, OK. But it sure sounds like they're just cashing out.

Ideally, Google should stay private and either implement a profit-sharing plan or give employees equity in the company and pay dividends. Of course, dividends are still double-taxed (taxed at the corporate level and taxed again when received by the stockholder), severely limiting what would otherwise be a VERY useful talent recruitment/retention tool. Tax-wise profit sharing probably makes more sense.

If they're still thinking of going public, they should go read Sarbanes-Oxley, listen to Elliot Spitzer (New York's attorney general), or listen to the numerous trial lawyers who will shake them down every time their share price drops. Especially while the American legal environment is so fscked up (accounting malpractice insurance is getting to be as expensive as it is for doctors), if you don't have to go public, DON'T DO IT!

Google Inc v Corp: Lack of financial transparency?

[j.leidner]

Richard Waters writes:
> Though the company does not disclose financial information, its [Google's] profits are growing rapidly and
> are reckoned to be running at an annual rate of about $150m on revenues of $500m.

Google was founded in 1998 as Google Incorporated, not as Google Corporation; unlike many startups with plans to go public, that status hasn't been changed since, which indeed means financial details are (and can legally remain) undisclosed.

On these grounds, it would be interesting what the author bases his assertion on that Google is actually profitable. -- I don't deny they might be, all I am saying is we don't know any official numbers. Normally, if you're planning to invest in a corporation, you can ask for their annual report to help you make up your mind. With non-corporations, it appears you have to rely on blind trust and gossip. Remember that whatever the income, they must have huge monthly bills to pay for the excellent staff they have hired and the huge commodity hardware clusters they run (electricity, replacements of nodes, operators). Anybody dare to post their xcalc(1) spreadsheet with estimates for upper and lower bounds of their expenses?

Yes, I would like to buy some Google shares online for a fixed price, but not in an auction. I suppose if they were to adopt the e-bay way, any clever investor would simply wait with their stock purchase until the release of Microsoft's forthcoming search engine...

What!!???

[djupedal]

Would you bid on a piece of Google?

No

Tech bubbles...seen one, seen them all...can you say 'about to burst?' Buy Google and watch it tank within 6 months...

Let's hope Google doesn't share their fate!

[jea6]

The only people who did very well were the coffee-makers. Google coffee anyone? Nogatech didn't start out well but improved once acquired.

And yes, these numbers don't account for dilution. How much free time do you think I have?

Ravenswood Winery (RVWD)
IPO: $10.50 per share
Currently: Delisted.

Salon.com (SALN)
IPO: $10.50 per share
Last: $0.06.

Andover.net currently Va Software Corp (LNUX)
IPO: $18.00 per share
Day 1 Close: $63.38
Last: $4.65

Nogatech, acquired by Zoran in Y2K
IPO: $12.00 per share
Day 1 Close: $9.41
Price when acquired: $7.38
Last: $15.35

Peet's Coffee and Tea (PEET)
IPO: $8.00 per share
Last: $19.87

Briazz, Inc. (BRZZ)
IPO: $8.00 per share
Last: $0.17

Instinet Corp (INET)
Last: $5.83

Why bother?

[base3]

Soon after they go public, they'll try to monetize searches by charging a subscription fee, or adding Salonesqe intrusive ads. At that point, worthwhile sites will start blocking the Googlebot. From there, it's a death spiral.

-1 Bubble-think on the MQR standard

[MarkusQ]

Actually, quite the opposite. By staying private they lose the ability to keep the talent on board by issuing those high-valued employees stock in the company.

That's the kind of thinking that killed the tech boom. The way to keep employees is to pay them what they are worth, treat them well, and be honest with them. You may lose the ones that would rather by treated badly and lied to, but you are actually better off without them.

On the original point, you may also lose the potential for unrestrained growth, but (IMHO) this is also a good thing. I tend towards the medical view of that kind of unplaned exponential growth.

-- MarkusQ

An Open Source Alternative to Google

[yintercept]

Oh no! Teh Googli is gonna become another Evil Empire for Slashdot to fight!

It is really disconcerting, with adwords and other things, I've heard rumors that Google might actually even be profitable. I really try not to pay attention to such stuff.

I abandonned Yahoo and Altavista when they started all that corporate greed, we want to make money stuff. Lets not even get into that Goto/Overture garbage. Now Google is like doing the same thing!

I mean, if google comes out the door and makes money...Well, I think maybe the /. community should be thinking of an open source alternative to search engines where no one makes any money. I don't know, it seems like there should be some smart people with free time who would like to work on such a project.

Re:An Open Source Alternative to Google

[frank_adrian314159]

maybe the /. community should be thinking of an open source alternative to search engines

Actually, that would be a good idea - use a distributed database that could be dumped over more servers than Google ever had. Crawling would be much faster, too.

Re:An Open Source Alternative to Google

[meme_police]

Yes, smart people could come up with a great search engine. But you'd need rich people to support it's infrastructure if it got popular. Or you need a company that makes a PROFIT to run it. Otherwise it's going to disappear. Common sense.

Re:An Open Source Alternative to Google

[Luigi30]

So...

1. Make search engine.
2. Become popular.
3. Get rich infrastructure
4. Profit!

Right?

Those were *blind* auctions

[AntonyBartlett]

Based on a "Dutch auction" process, online bidders will post the price they are willing to pay and the number of shares they want to purchase. Bidders will not know what the high bids are and cannot adjust their bids. The bidding will remain open six to eight weeks, which is the same time traditional investment banks use between the time an IPO is filed with the Securities and Exchange commission and the security is priced.

When the bidding closes for Ravenswood, the highest bidders will receive the shares they requested, and allocations will work backward until the 1 million shares are distributed.

Forget it!

Re:Those were *blind* auctions

[Anonymous Coward]

You don't know anything about auctions, do you? People who know what they're doing (i.e. not eBay) prefer sealed-bid auctions.

Re:Those were *blind* auctions

[AntonyBartlett]

You don't know anything about auctions, do you? People who know what they're doing (i.e. not eBay) prefer sealed-bid auctions.

I will admit to limited experience of auctions, but that's one hell of a generalisation that you're making without any evidence to back it up!

As far as I can see it, sealed-bid auctions only benefit buyers who have a strong idea of what they are prepared to pay for a thing, and don't mind paying it. That's all very well if I'm buying a DVD that I'm going to watch, or a picture that I'm going to hang on my wall - but what a stock certificate is worth to me happens to depend rather a lot upon what others think it's worth.

Re: Ravenswood Winery (Nullum Vinum Flaccidum)

[mdmitchell]

Being a zinfandel(*) maven as well as a geek, I bought into the Ravenswood IPO. This was the first IPO done under the auction system for which William Vickery won the Nobel Prize in Economics in 1996.

The system makes a lot of sense from the standpoint of the company going public as well as for the individual investor. It works like this: A deadline for offers is set, along with a target price. Investors bid a number of shares they wish to purchase, along with the highest price they are willing to pay. When all the bids are in, the banker starts filling orders beginning with the highest bid. Everyone who bid at that level gets all the shares they ordered, then the banker goes down to the next highest bid, fills all the orders at that bid, and so on until all the shares are distributed.

The bid price where the shares run out is the price everybody pays, even if they bid higher. So in the case of Ravenswood, I bid 12, and got my shares at 10 1/2. (**)

Everyone bids once, so you don't get the bidding frenzy of a typical auction and everyone gets an equal opportunity to buy (unlike eBay).
The company selling the shares leaves less money on the table, because the price they get is set by the auction and not by an investment banker who underwrites the IPO (and makes windfall profits if it can sell the IPO shares for more than they paid they company for them)
And since the market sets the initial price, you don't get those huge first-day runups and subsequent collapses that marked many IPOs in the stock market bubble.
It's even more efficient to do since most of the deal can be done online, and you don't have to pay brokers for schmoozing big institutional investors.

*--I'm enough of a zinfandel fan that my office is decorated with posters signed by winemakers like Joel Peterson ( Ravenswood ), Kent Rosenblum (Rosenblum Cellars), and Matt Cline (Cline Cellars), so I was familiar with the Ravenswood business plan (***) and knew the shares would be a good investment.

**--It indeed turned out to be a very good investment. A coupla years later, Canandaigua Brands (Almaden, Paul Masson) bought out Ravenswood for $29.50 a share, so I nearly tripled my money.

***--They used the proceeds of the IPO to construct a second winemaking facility, so they could expand production of their County series zins, and start making merlot too.

Profit sharing? You're clueless. Sorry.

[Anonymous Coward]

Yes, profit sharing is a nice visible calculable number that never shrinks once the money is there.

However, the actual _value_ of the profit sharing in 99% of profit sharing companies is so low that it is more likely to depress the employee not provide an incentive to work harder.

If the employee sees an extra $100 a year from profit sharing (this is a typical and not unreasonable number) and they're working their ass off for that to happen, what are the odds they're going to work that hard next year for a lousy extra $100 bucks?

They're not.

They're going home at 4:59pm and turning on the TV and hanging out with their spouse and kids.

How do I get a ticket to your idealistic little world?

Re:Slashdotter saw this IPO coming from a mile awa

[jafuser]

This has got to be a Troll.

An employee of Google wrote an article to Slashdot and suggested that Google favors H-1B workers over Americans.

Read the entire post you linked to. Not only are your statements incorrect about the content of the post, but the post was even deliberately written to refute arguments like yours.

The poster you link to states, "I'm not involved in the hiring process at all, and I have no information on Google's hiring policies (except that we only hire really good people)."

The poster stated that when she hired for IBM, that they only hired the absolute best engineers, whether they are American or not.

The poster does not anywhere state that IBM favors H-1Bs or Americans. He/she only stated that when they find an exceptionally good engineer, IBM will go out of their way to do whatever is necessary to hire him/her.

As far as google, the poster says very little, because he/she is not responsible for hiring at Google. But her post does suggest that they also only hire the absolutely best talent, which implies that they may do the same as IBM.

Lemme get this straight...

[FrankDrebin]

you put up your cash for a chunk of Google's cache.

Re:Ben, er du Dansk?

[ben_of_copenhagen]

Jeps. Andsvagt nick, men noget skulle jo skrive...

A better alternative?

[pritcharda]

The rational for an auction may be a Benefit for the technology community. Getting an IPO stock allocation is almost impossible for most investors, and without a VERY large trading account, or a good friend at the issuing company, you have no chance. By offering the initial release at auction, and thus bypassing the IPO process, Google has an opportunity to get its stock into the hands of the ?community? and not just institutional traders. Creating a level playing field for all who want to participate. (Im sure the SEC still has rules governing who can participate, but I haven?t found any with a quick search) If you want a quick overview of the IPO process, and how it relates to traders. Have a look (atInvestopedia.com)

Re:Slashdotter saw this IPO coming from a mile awa

[Anonymous Coward]

The linked post does, indeed, support the position of the grandparent article.

The Google employee claims that Google hires "the best" irrespective of national origin. Yet, month after month, Google advertises unfilled job positions when 9% of Americans in Silicon Valley are unemployed. It boggles my mind to know that Google cannot find 20+ qualified employees out of tens of thousands of unemployed Americans.

Therefore, we can only conclude that Google is favoring H-1B workers. Google bypasses the 9% unemployed to hire that cherished H-1B worker.

Again, the "ugly" ethical question arises. Should we buy into the IPO and enrich the founders of Google when Google appears to favor H-1B workers? Sometimes, we need to think beyond our pocket books. We can and should keep out greed in check -- for the sake of ethics. If Google wants to hold an IPO, it should first move its headquarters overseas to a country which has the workers that "best match" Google's needs.

What if??

[Rudy Rodarte]

What if some company with REALLY deep pockets started a "Hostile takeover?" Could this really happen, as I am not familiar with SEC regualations and such, but could this really happen? What if Microsoft or IBM held a large majority of Google....

Re:Slashdotter saw this IPO coming from a mile awa

[nelsonal]

If google's management believes this, then now is the ideal time to take the company public. They will get a good price now for what will be essentially worthless in a few years. They could issue stock for a percentage of the company save the cash (and return to private life after the crash with a few extra billion in the bank), or make an acquisition that will have value later (AOL shareholders made out like bandits getting half of TimeWarner instead of nothing). Besides there will be a ton of pressure on the company to go public, their earlier investors want out, and the investment banks see Google as something like Netscape, a great zooming IPO that could reinvigorate the IPO market when they do go public. Not that it should, but it probably will bring excitement back to an area that thrives on hopes and dreams.

I'm going to get rich!

[CitznFish]

Oh wait, the average Joe can't buy IPO stocks and auctioning stocks will just artificially inflate teir value quicker than the stock market. I guess I'll remain poor instead.

Wouldn't that be...

[zCyl]

Who watches the watchmen watching the watchmen?

Wouldn't that be X10?

the google IPO will spawn an new gold rush

[mcguyver]

There are many companies that could IPO today but are waiting for google to test the waters. After google goes public, which will definetly happen if they want to compete with M$, then we will see many other companies file for an IPO. Google's IPO could impact the entire industry. Confidence will increase, others will go public and hopefully the number of available jobs increases as well.

Sell short

[Archangel Michael]

I would love to sell this IPO short. The reason is simple, most IPOs are OVERHYPED sales. Anytime there is hype and overhype, things get out of wack. In the case of IPOs, it is prices, which almost always receed after the initial IPO and spot resale to the gullible wannabes.

The price will drop, as expectations come inline with reality.

1. IPO
2. Sell Short
3. Buy Long (later)
4. Profit!!

If I did this during the DotBomb, I would be RICH!

Google needs IPO to survive???

[FreshFunk510]

I'm going to play Devil's advocate for a second since most people have already responded with the "No, don't go IPO! It will kill you and you have to kowtow to investors" argument.

I'm not on the board nor do I even work at Google but what about from the perspective that Google needs an IPO to survive? Well, not in the strictest sense, but how much can the search industry grow? Probably quite a bit, actually, and I'm sure they make revenue off of other services they offer but the majority of their revenue comes from selling search.

Like it or not, selling search will soon run out. Any and every company out there constantly has to have eyes on the future, 1, 5, 10, 20 years out. It's the only way to survive in the long run (much like a country). Selling search now won't be what it is in 10 (or even 5) years from now. The competitors are also quickly rising.

So Google, in its right mind, has to think big. They have to think beyond linearly improving search risking death by competitors. Google, like Sony, Microsoft, (and Sun, hopefully), needs to grow its business in a big way. They need another big idea or a big idea that involves incorporating search into a grander scheme. In the long run, if they don't, they will die.

This may sound like FUD but in the tech world this is how it work. 1) You have to stay on top of your game and 2) You've always gotta fight to get that Ace of Spades in your hand. This is especially important in tech since it mutates quickly.

Oh yeah, in case I didn't point the obvious, any such undertaking will probably require insane amounts of money. One example of what I'm talking about is Microsoft's investment in .Net.

Most Hilarious Quote of Wallstreet Spin

[shameless_sellout]

"They could get a $100bn" stock market value, said one person involved.

"However, all the shares would end up with Aunt Agatha in Des Moines and Uncle Milt in Pittsburgh and there would be no real public market at all."

What? You mean the investment bankers and institutional investors aren't interested in buying shares if THEY ARE FORCED TO PAY A FAIR PRICE? All the shares would end up with Aunt Agatha ONLY if she bid more for them. Of course, the real issue is that the investment bankers and institutional investors are peeing their pants at the prospects of losing their privelaged god-given right to buy IPO shares before anyone else can and then flip them for 3x profit on the same day of the IPO.

Google is selling shares to MAKE MONEY. They do not care who owns them. This is a long-needed innovation in finance. Go Google!

Simply brilliant!

[Anonymous Coward]

Google sells itself as being able to target advertising precisely and effectively. Selling itself to all its users is just an extension of that. So simple, it's genius.

And: Using a target market as massive as Google's audience is likely to create a huge demand-led spike in Google's share price. Good for the founders because they cash out at maximum money, good for those with nerves of steel who short the stock (or go long puts) soon after IPO. Anything over 15 times earnings is madness.

The shareholders require profit

[sacrilicious]

"Growth" will be expected year after year - the innovative ideas that have made google so successful will give way.

It actually depends on the expectations of the shareholders

Corporate laws are constructed in such a manner that a company executive can be sued for failing to maximize profit, as described in this essay:

The provision in the law [which inhibits executives and corporations from being socially responsible] is the one that says that the purpose of the corporation is simply to make money for shareholders. Distilled to its essence, it says that the people who run corporations have a legal duty to shareholders, and that duty is to make money. Failing this duty can leave directors and officers open to being sued by shareholders.

Google and Ashcroft

[shadowxtc]

Last time I checked, Google works for Ashcroft (Google was originally started as an "open" project by some MIT guys, got federal funding, was quickly closed spec-wise... no doubt in my mind it's helping TIA or whatnot). I don't think I'll ever be supporting that kind of endeavor financially.

why Porsche?

[Anonymous Coward]

I can understand having one Porsche, but why would you need three? Why not get, say, a Mercedes instead of another Porsche?

You dot heads are wacked

[Anonymous Coward]

No need to go public? Tell me, how are the current owners supposed to get their investment out of the company? Raid the coffee kitty?

Open source alternatives? Good luck. The problem as usual: customer service.

Google greedy? You are naive. The company is worth a ton of money, because people percieve it as valuable and want to buy some of it. Who are you to tell these people no? God?

No IPO also means DEATH!

[Anonymous Coward]

Well, having no IPO also means death. Please read "Slashdotter saw this IPO coming from a mile away".

Google has about 1 year to IPO before Microsoft clobbers it in the search engine business.

I was going to invest..

[Anonymous Coward]

but then I decided to spend my savings on a candle truck instead.

Google is dying

[Tuxinatorium]

Seriously, google is already well past the apex of its usefulness as a search engine and all sorts of internet scum have figured out how to fool it into ranking content-less popup-filled spam pages high. It's already becoming hard to find anything actually good if any of the keywords have anything to do with anything commercial. Don't even get me started on how 9999 of the top 10000 "warez" pages turned up by google are just popup porno bait.

His whole 4-bytes tirade thing is retarded.

[Ayanami Rei]

It's called long long (64-bit). Claims that it is somehow slow is retarded since most checksumming algorithms can be written using MMX, so generating and handling up to 128-bit docIDs is trivial.

Hell, RPM uses 64-bit identifiers, ext2 supports 64-bit file offsets, so what about linux needing a special API?

Not for the last 3 years has that been an real issue, even on 32-bit archs.

The guy is a loon. Please disregard google-watch (or at least each a huge grain of salt first).

Sure something is funky, and everyone has their own pet conspiarcy theory. Maybe the IPO cash will help them fix it!

In defense of investment bankers

[Man_Holmes]

It's clear that you don't understand how an investment bank operates.

If company X floats a million shares at $10 the investment bank agrees to guarantee that amount. Supppose they only sell a half million shares at $10? The investment bank now owns the other half million and it may take them a long time (if ever) to recoup their investment.

Not everyone is a Google. But the profits on a Google IPO go a long way to spreading the risk on a lot of other no name companies.

If you take away the Google's of the world you end up reducing the investment banks risk taking incentives. So the end result is that far fewer companies are able go raise money via the IPO route.

So they end up having to sell out to a Microsoft at a far less rich multiple to grow their company/product. The customer loses the choice and diversity of product selection because it becomes so difficult for small companies to go public. The enterpreneur loses the incentive to take the swings for the home run style companies.

I can't or won't defend the obscene profits the investment banks made a few years back. But there are far better ways to introduce a little more ocmpetition into the process than what Google is supposedly doing.

Man Holmes

Re:Slashdotter saw this IPO coming from a mile awa

[rifter]

The person you are responding to is indeed a troll. YHBT HAND. Check out the other posts from them, and that website. It was actually a pretty complete troll, and they troll a lot. It's one of those troll personas trolls create so that they can troll more effectively.

so what axe do you have to grind?

[alizard]

(I know I may burn some karma on this, but it is worth it if I can contribute to putting an end to Everyman's lies about Google.)

Why do you care? What's your personal interest?

You act like somebody had taken a dump in the middle of your church.

An explanation of your personal interest would do much to define just why we should listen to you and not Everyman.

Re:so what axe do you have to grind?

[stup]

Why do you care? What's your personal interest?

An explanation of your personal interest would do much to define just why we should listen to you and not the parent post?

Rinse, repeat...

Re:so what axe do you have to grind?

[hkmwbz]

My personal interest is that I hate seeing someone's good reputation tainted by lies. It is perfectly all right to "monitor" Google and other powerful companies and people, but this should done by someone who is impartial, or at least doesn't do it just because he is angry with Google for not ranking him higher.

I don't know why I make myself so involved in this matter, but it doesn't take me long to give people the other side of the story, and it's worth it to me. Google has helped me immensely through the last couple of years, and I don't want to see it go down because of lies and deception.

Brandt has received too much coverage, and now he's trying to spread his FUD and lies on Slashdot too. I just don't think it is right.

Since no one else said anything, I thought I might as well do it.

To sum up: My personal interest is to expose lies. In this case, I expose lies about Google. In other cases, I expose lies about others. I'm not a saint and I don't give all my money to starving children in poor countries. I'm a geeky kind of guy and therefore I care about geeky things. If I can make a difference for something I care about, find useful, or am interested in, then I am happy.

Huh?

[Anonymous Coward]

I think you've gone way overboard.