Slashdot Mirror
Google Sets IPO Pricing
It appears that Google has set their IPO price - 108$ - 135$ per share. Yowza. A reminder that this is done through the Dutch Auction ? process, which makes that pricing even more...uh...interesting.
← Back to Stories (view on slashdot.org)
Google Hopes to Raise $2 Billion in IPO
14 minutes ago
WASHINGTON (Reuters) - Google Inc., the world's No. 1 Web search provider, said on Monday it hoped to raise as much as $2 billion in its highly anticipated initial public offering and could have an initial market cap as high as $36.25 billion.
About 24.6 million shares will be sold in the IPO for between $108 and $135, according to an amended prospectus filed with the U.S. Securities and Exchange Commission (news - web sites).
Mountain View, California-based Google plans to sell 14.1 million shares, while another 10.5 million will be sold by stockholders. It has received approval to list its Class A common stock on the Nasdaq under the symbol "GOOG" (Nasdaq:GOOG - news).
The company plans to use the net proceeds from the sale, estimated to be $1.66 billion, for general corporate purposes. It will not receive any of the proceeds from shares sold by selling stockholders.
Additionally, Google reported second-quarter earnings of $79.1 million on revenue of $700.2 million, up from earnings of $64 million on revenue of $651.6 million in the 2004 first quarter, according to the prospectus.
Operating income for the second quarter was $171 million, up from $155.3 million in the first quarter, according to the filing.
A group of underwriters, led by Morgan Stanley (NYSE:MWD - news) and Credit Suisse First Boston, will have the option to buy another 3.7 million Class A common shares under the IPO.
GOOG as stock ticker looks wierd, I would have preferred GLE
Karma: Good! Napster: Baad!
They may also start leveraging the success of popular services that use their Web APIs , such as Google Alert and Copyscape , particularly with the commercialization of Google Alert. Positioning themselves as a general technology platform for the web is surely a step in the right direction to further raising their valuation.
Will be interesting to see how quiet they stay from now till the actual IPO...
Their opening bid is high, and they will bring the price per share down until there is a buyer. At that point, everyone else will buy shares at that price. I think their price per share will be in the 50-60 Dollar range.
Pete Carr Owner Chatmag.com
Who will actually be able to even buy it at that price when it hits? Most people probably wont be able to get the stock until its even higher. How does one go about getting a stock at its IPO price?
Open an account with a participating broker.
That share price is nothing compared to Berkshire Hathaway. It's not the share price that matters, but the earnings per share ($5,190 in the case of Berkshire). A higher stock price is justified if earnings are high and have growth potential.
Consider 2 businesses of equal value doing IPO. One creates 1000 shares, and sells them for $10 per share. The other creates 100 shares and sells them for $100 per share. Which is the better deal? Duh! it's the same deal (essentially).
In this case, it appears Google is (or thinks it is) selling "large chunks" of the company. They could offer instead 10 times as many shares, for only $13.50 a piece. Maybe this would be smart. It apparently would suck in a large number of Slashdot readers!
And this crowd is supposed to be math-sci literate! How depressing... I think I'll go off and cry about the poor state of the nation's youth now.
So the higher it starts, the further it is from the $5 magic floor.
Mencken had it right. So glad that's old news.
and 51% accumulation would mean a hostile takeover.
No. Sergey Brin and Larry Page have Class B shares with 10 votes per share, and they own a third of the company.
This means that, assuming you want to have to get as few Class Bs as possible, you would need to own 100% of the Class A shares, along with 40% of the Class B shares, which are not for sale, I might add.
Good luck on that hostile takeover.
Random and weird software I've written.
Google is only offering a tiny fraction of the ownership in this offering. If they raise $2 billion on a market cap of $36 billion, they've only let go of 5.5% of the equity.
Stop by my site where I write about ERP systems & more
I find it difficult to believe that this stock price can be maintained
You mean the market capital of Google wont be able to maintain that price right? The Market Cap = the Stock Price * the Number of shares; therefore, the stock price alone dosn't mean reflect the value of the company.
According to the article; Which you're correct the market cap of BA is 39.80B and Google wont be able to keep that for long.:
WASHINGTON (Reuters) - Google Inc., the world's No. 1 Web search provider, said on Monday it hoped to raise as much as $2 billion in its highly anticipated initial public offering and could have an initial market cap as high as $36.25 billion. About 24.6 million shares will be sold in the IPO for between $108 and $135, according to an amended prospectus filed with the U.S. Securities and Exchange Commission (news - web sites).
It was a bidding system. Google said, "Hey, guys, we want to sell 26.4 million shares. How much would you pay for 'em?"
People wrote in bids and the amount they'd buy at that bid. Google took the highest until they'd sold all 26.4 million shares.
So the answer is, because someone was willing to pay that much.
Berkshire-Hathaway's A stock was worth just over $88,000 per share this morning. Their B stock is almost $3,000.
LegendMUD
If people are smart they will realize that Google isn't the one who sets the price. Due to the Dutch auction format it's the investors who set the price.
In Dutch auction you take the highest price and count down the number of shares till you run out. The last person to be issued shares at the lowest price is the one who sets the price for the *entire* auction. Everyone gets their shares at that price. So if you believe that Google is overvaluating their stock then what you need to do is pursaude the majority of those purchasing the stock that it should really be *insert fair market value* for the stock.
Personally I think the stock is worth about half of what Google said, but I am not a professional nor do I claim to be.
While search engines remain a free market, Google serves the advertisers by serving the users. They have eyeballs to sell because they give users what they value. If they fail to serve the users they'll loose the eyeballs to the currently crappier options.
To determine if a stock is "high priced" or not, you don't look at the price of the stock. You look at other things, notably the price to earnings ratio (P/E). If you look at $135/share, that's a steal compared to other tech stocks. If there are only 24.6M shares (which there are actually more), going by the latest quarter where Google earned $79.1M, that's an earnings per share (EPS) of ~$3.21. Assuming that's an average for 4 quarters, that's a P/E of only about 10 ($12.84/$135 = 10.5)! Most tech stocks are trading around a P/E of 30, some even up in the stratosphere of 50+ (in the dot-com boom they were around 90+). More total shares means a P/E that's even lower since EPS.
Basic stock market concepts here boys... you buy based on P/E ratio, not "sticker price" of a stock. The reason? Even though it's completely made up, you expect that if earnings goes up 10%, the price of a stock will go up by 10% * P/E. The P/E ratio is like a "magnifier" on the earnings growth, and it's why people like stocks with high P/E - but not too high because that can indicate a bubble. Basically you look at P/E relative to competitors, and no matter how you cut it Google's P/E looks like bargain-basement pricing to me at $130/share. Heck, it's a relative bargain at even $300/share by those measures... (P/E somewhere around 30).
For comparison, the P/E of M$ is 42, Apple is 54, Amazon is 107, Yahoo! is 107... so Google is indeed a bargain.
"There are a dozen opinions on a matter until you know the truth. Then there is only one." - CS Lewis (paraprhase)
So their 2004 earnings are estimated to be somewhere in the $250-350m range.
So we've got about 24.6m shares. Profit per share is in the $11-15 range. The price per share is about $108-135. This puts the P/E ratio at about 7-12, which is extremely low. P/E Ratios are usually in the teens, and for
My guess? Google stock will end up being in the $150-175 range, if not more.
Small potatoes make the steak look bigger.
For one, the $ value per share is irrelevant, because it totally ignores any sort of qualifying factors. Like P/E ratio, Price to Book, Float, Cash Flow, anything. Hell, what if MS only had 100,000 shares of stock, they would be worth 3,081,000 each. Most companies keep their stock prices below $100, to keep them more liquid and to appeal to a broader range of investors. Berkshire Hathaway intentionally keeps it's stock price High (illiquid - relatively speaking) in order to discourage speculation and such.
Any investment analyst will tell you that it's far better to have numerous low-priced shared than a few high-priced ones
Which is why you should FIRE that analyst.
The reason for the many and low is that this makes people feel happier "hey I got lots of shares" and has little or nothing to do about the performance of the stock.
Google may well under go a split in the next 12 months, or even a few splits, but the worry about a high price making the share unstable is completely unfounded.
Think on it this way. If a share is $100 or 100c and it goes up 10% then its the SAME 10%. However a 1c adjustment in a 100c share represents 1% down. For the $100 stock its almost a rounding error. The TOTAL value of stocks in the company represents the important measurement. For mutual funds the value of one share is irrelevant as if you are buying $1bn worth of stock who cares what the number of stock is its the $1bn that counts.
Investment Analysts talk a lot of hooey most of the time. These were the muppets who raved about Boo.com, WebVan, Enron, MCI Worldcom, AOL... need I go on ?
You are ALWAYS completely at the mercy of the share price whether you have a 200 x $1 or 2 x $100, 10% up is the same amount, and 10% down is the same amount.
BTW IANAFA.... but then most analysts do worse than a tracker fund.
An Eye for an Eye will make the whole world blind - Gandhi
It really doesn't matter because the average investor doesn't know any better. This is the same reason that stocks go up when the company announces a stock split. The idiots eat these stocks up because they think that there's something magical about owning a stock through the split.
Let me preface this by saying I have a degree in Finance. I ended up in IT because I realized that's where my true passion was, but nevertheless I learned a lot of crap about stock valuation and stuff like this.
Although the parent poster was for the most part correct, there is a significant meaning to a stock split to an investor. When a company's management decides to conduct a stock split, there are sending a signal to the market that they have a high confidence in their stock price. Management does not generally split stock that they feel may drop in the future.
Investors then purchase the stock, thereby driving up the price, because this action (a stock split) signifies that management perceives some additional value in the company that the general public does not. And since a stock price is simply the market's valuation of the company (not the instrinsic value of the company itself -- that can't be changed by a split as the parent pointed out), the price goes up because the split means new information has been released into the market. All of this is predicated on the theory that management knows more about the future direction of the company than the general public, which hopefully is true.
For comparison, the P/E of M$ is 42, Apple is 54, Amazon is 107, Yahoo! is 107... so Google is indeed a bargain.
Huh? The Reuters article quotes a market cap that could be as high as 39.2 billion USD. It also states that 2nd quarter earnings were 79.1 million USD. If we assume that Google performs similarly for the other two quarters, annual profit would be somewhere around 316 million USD, which would give Google stock a whopping P/E of 124.
Hardly a "bargain".
This has been going on for years.
I agree with you that looking at the raw price per share is a silly way to value a stock. If Google had only ten shares, and somebody offered to sell me one for $50k, that'd be a hell of a deal. If they had 10 billion shares, then it would be a bit less attractive.
That being said, your math is wrong. Google and its owners (the founders, the VCs, Time Warner, etc.) are selling 24.6 million shares to the public. Once the IPO is done, they'll have 268.5 million shares outstanding, so they're selling a bit less than 10% of the company into the market. With 268.5 million shares outstanding, and quarterly earnings of $79.1 million, annualized to $316.4 million, they're delivering annual earnings per share of $1.18. That's a P/E of 91.5 to 114, depending on the IPO price. While Google's a great company, that's a damn pricey valuation.
Also, remember that the Class A shares they're selling are really second-class shares. The founders have issued themselves special Class B shares that guarantee them voting control, even if they own a very small % of the overall equity of the company.
You say the site is crowded. Did you go to search.yahoo.com or www.yahoo.com? The latter is crowded, the former is quite clean.
From
/default.asp?lpv=1&loc=searchhp&tab=web&query=e-ma il+example.com
http://www.incidents.org/
Updated July 26th 2004 16:04 UTC (Handler: Johannes Ullrich)
* latest MyDOOM search engine use
Latest MyDoom search engine use
(initial analysis. more details, and eventual corrections, will be posted as they become available)
The latest version of MyDoom, which started arriving in peoples mail boxes in force today, uses search eninges to find more recipients for its message.
Once the virus is started, it searched the users files for domain names. Once it spotted a domain name (e.g. '@example.com', or in 'www.example.com'), it will search various search engines for valid e-mail addresses within these domains. These search engines include Lycos, Google, Altavista, Yahoo and possibly others. Some of the search strings used:
GET
Some search engines report performance issues.
what is relevant is not the stock price but the market cap. market cap, theoretically, should reflect net present value which is the summation of discounted cash flows over the average investor's investment horizon. One can take 10 years as the average investment horizon and I cannot imagine profits of google that will amount to that kind NPV. What people are betting on is not the fundamentals of the company but are betting on the stupidity (optimism) of the next guy. Pricing is being driven by supply and demand for a stock which is disconnected from the real value of the stock. Well who loses in the process it is always the common investor who loses as most small investors are either not savvy enough or a also betting on general euphoria. The sophisticated investors cover typically are better positioned informationally (insiders) to enter or exit the markets. Google or Yahoo or Amazon they (will) all come down tumbling when the bubble bursts. this doesnt make them bad businesses but bad investments.