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Why Wall Street Wants Google to Fail
Sam writes "The most anticipated initial public offering in years threatens to derail a cherished gravy train, where underpriced shares are handed out to favored investors and grateful CEOs."
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As much as the media hype surrounding this offering has tried to present the image that the little guy can take part it simply is not true.
Most of the brokerages that will be offering this to the "public" still require substanital assets in the account, most with a 100,000 dollar min.
Instead, the underwriters, led by Morgan Stanley and Credit Suisse First Boston, will get 3%
All very nice, reputable people who really don't deserve to be treated like shit. I mean, they'd never to that to anybody themselves would they?
"A door is what a dog is perpetually on the wrong side of" - Ogden Nash
Second, why are they demanding share prices in the $100 range when Ebay/Yahoo (company's with more value) are priced significantly less than that?
As a day trader, I'm sure you know that the price of the individual share has no individual impact on the total value of the company at all.
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The original article explains exactly why market analysts are trash-talking Google and the upcoming IPO: They don't want the Dutch auction system to cut them out of the picture.
Your claim that Linus made millions using precisely this system is incorrect. Yes, Linus was allowed to buy stock at bargain basement prices, and he earned a ton when the various Linux companies IPO'ed. The difference is, Linus was closer to an employee than to a traditional investor.
Here's the way I understand the situation, and please correct me if I'm wrong: When a company says, "We're expecting to go public at $5 a share, but we'll let Guybrush Threepwood buy a thousand of them at $1 a share," then the company is agreeing to give up $4000 of the money they could have received from the IPO. But when a stock brokerage says, "We're expecting this IPO to be worth $5/share, but we'll tell them to offer the shares for $4 so our investors will love us," they're taking 20% of the money that should have been obtained from IPO and putting it directly into investors' pockets. That's underhanded, and maybe even technically illegal. But it's what brokers do to keep their investors coming back for more.
You want the truthiness? You can't handle the truthiness!
The "stock market" is heavily involved in deliberate government corruption.
The Bush administration has been appointing heads of government agencies who reduce the role of those agencies. After they destroy the effectiveness of the agencies, they go back to running their businesses, and the corruption gives them more profit.
Another way they corrupt government is to starve the agencies of operating funds.
For a discussion of starving the SEC (U.S. Securities and Exchange Commission, regulates the stock exchange), see this article: Keeping the SEC on a Starvation Diet. The corrupters don't want their stock manipulations discovered. They want more of this: Enron fraud, this: WorldCom fraud and this: Tyco fraud.
This is all part of extremely widespread corruption in the U.S. government. Even the 3 movies and 34 books linked in this article are not enough to tell the story: Unprecedented Corruption: A guide to conflict of interest in the U.S. government.
They are corrupting the IRS (U.S. Internal Revenue Service, collects taxes), too. The corrupters definitely do NOT want their tax returns to be audited, so they arrange that there is not enough money for audits: Bush Request for IRS Not Enough, Report Says
They are corrupting the patent office the same way. That's why there are so many crazy patents.
However, the key function of an underwriter / investment bank is to CREATE A MARKET. This includes some activities such as buying stock if the stock proves too weak too soon. They often have contracts that compensate them if the stock maintains a certain price for a certain amount of time. This is why IPO managers want to allocate stock to known people who will not sell and take a quick profit. There is no such protection with Google - anybody who buys the stock through the IPO can sell at any time (I believe - I have not read through Google's IPO site). I am, of course, not privy to the details of Google's IPO contract with their underwriters, however, it seems that the IPO manager would not want to guarantee stock prices when the manager has absolutely no control over who buys the stock and when they will sell.
I predict that the Google IPO will fail miserably - I don't predict this because I want to see it - I just think that given market dynamics, this is what will happen. Until a market is established for a stock, an IPO wants to be carefully managed, and Google is side-stepping that management process.
For one, I will be watching the price, and if and when it breaks, I will sell short. And I bet that I'll make at least a few dollars on the trade.
Anyone who is contemplating buying google owes it to themselves to read Reminiscences of a Stock Operator by Edwin Lefèvre. It is as relevant and educational today as when it was written 70 years ago!
I certainly may be proved wrong, and will be willing to learn something new. We'll all see soon, won't we!
From my experience (mind you, I've been making money in the 2000 marketers while most other people have lost) analysts, experts, advisors are generally full of $hit. The great majority of these people have a reason to look out for their own interests, and there is actually motivation to lead others down the wrong path. A lot of what you hear on CNBC etc is just pure garbage.
So whether an analyst tells me that Google's IPO is overpriced, or the warnings are overblown (as this article claims), I pretty much take any of that advice with a whopping scoop of salt and do what I feel is best, given my knowledge in the area.
I dare say that the "little investor" would get the raw end of the deal in this IPO. Anyone who buys shares at $130 on opening day will quite likely be mighty upset when in a few months those shares are worth half that or less. I'm not sure that Google can sustain that high of a price for very long.
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Sure it is. It is just an observational science rather than an experimental science, which means that it takes much longer to test ideas as you can't do controlled experiments. Some economic theories have become well founded over time (although they are certainly incomplete). The evidence for other ideas have far to few data points and far to many external factors to come to any real conclusion. Of course short of hard data, one wants to have at least a best guess answer, and noone seems to be able to say "I don't know", so more subjective judgement is often put on top of the science. Which is fine except for the few egotistic idiots that will try to treat their best guess as scientific fact, but what can you do?
See http://forums.seochat.com/archive/t-12969.
Stanford has granted an exclusive Pagerank license until 2011. After that Stanford can license it to anyone they want until it expires in 2017.
What kind of bullshit law is this? Nothing. What you are talking about is what the stockholders and board of directors require the company officers to "exercise due dilligence" in keeping the company charter (ie, profitable as possible).
However, in Google's case, the board of directors is the main three who own voting stock, and the stock you get off the market is "non-voting stock". Read up on their released financial docs.
The guys at google aren't dumb. And they still have a potential to "not be evil". I have hope.
From what I understand from the article (keeping in mind that I pay people to look after my money), there will be more shares available for Joe Investor, and the opening price for the shares will be decided by input from Joe Investor... rather than investment bankers asking investment bankers what investment bankers are willing to pay for these shares, Google will be asking the general public what their shares are worth.
This is still Google attempting to make money from an IPO, but that's nothing new, why should The Oracle not make a little green to keep offering it's top notch services?? However, it seems to be Google is doing everything they can to get feedback from actual users (or at least actual investors), and is keeping toadying by the big investment banks to a minimum...
The end goal here is not cheaper shares... the major goal is a fair share price decided by the investors rather than an undervalued share price decided by bankers looking to curry favour with other big companies and line their own pockets (for doing nothing really...)
Although I'm sure I've missed the point entirely... I hate $$$... hehehe
The chains are broken
Loki is free
Ragnarok is at hand...