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Google Considering IPO Auction Online

Posted by ryuzaki0 on from the raising-the-funds dept.

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?"

2 of 271 comments (clear)

  1. Re:IPO=Death by seschmi · · Score: 5, Interesting

    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.

  2. Re:Uhm, yes, I would, but not immediately by letxa2000 · · Score: 5, Interesting
    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.