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

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

[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.

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.

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.

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

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?

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.