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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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investor has a shot? How out of character!
*BOOM* Damnit, there goes my sarcasm detector again.....
Wall Street is in the power circle and want to keep it closed. Radicals, such as the people who operate Google, are to be kept out. Greedy individuals interested in human interests and making real products have no business on Wall Street (according to Wall Street).
I don't have any greater respect for companies like Enron who cooked their books to inflate stock prices, but one can begin to get an insight as to the motivation to do it in the first place. Even more is the shame that companies get punished for not providing short-term gains, which are worth little in the real world in terms of product/service output.
It would be cool if it didn't suck.
Okay, let's look at what Google has:
1. Lots of public information (stock charts, news and webpages primarily)
2. Lots of private information (what users are search/researching)
3. Lots of computer scientists and programmers good at working with lots of data
4. Tons of computer power
You combine these elements, and you have a group of people that might be able to make sense of some of the chaos in the financial markets. They could get RICH! Fear the Google.
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.
I think taking google would cause a serious disturbance; hence everygeek in the world against them :| I wouldn't even wan to temp that!
-- [H]itman_forhire
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
One rare thing about Google is their "Don't Be Evil." mantra, which somewhat translates to the company turning down the chance to make quick bucks today in the expectation that they'll get that money back in the long run through their near-flawless reputation.
That's how Linus made millions.
Here's an article in Business Week on the google IPO.
Commentary: Google This: Investor Beware
The Web search outfit's business is terrific, but its long-term outlook is cloudy
When Google Inc. predicted a wallet-cleaning price range of $108 to $135 for its shares on July 26, few on Wall Street flinched. And why should they? Despite a valuation as high as $36 billion for its offering expected in August, the search kingpin's business continues to dazzle. Growth in sales and profits have rocketed over 100% so far this year. And analysts project Google will generate more than $350 million in 2004 net profits. Even with stepped-up competition, Google's share of the U.S. search market has grown five points in the past year, to 37%, giving it a comfortable 10-point lead over Yahoo! Inc. (YHOO ), according to researcher comScore.
Sure, IPOs are inherently risky, but Google stock may be especially unwise at this nosebleed price range. At the midpoint price, Google's would-be $33 billion valuation is a step down from its closest competitor, Yahoo, a seasoned Internet giant with a diverse revenue stream and a market value of $40 billion. Compare projected 2005 earnings against these valuations, however, and Google's multiple is just a speck below Yahoo's. That's troubling, since Google is largely a one-trick pony, with no easy means to diversify its business and hefty management challenges. "It's priced for ultimate perfection," says a skeptical Google investor who plans on selling after the IPO.
Long-term investors should be very wary of Google's single-barrel business model. Selling ads that appear next to search results, or paid search, contributes over 80% of Google's sales. According to Forrester Research Inc (FORR )., the U.S. search ad market grew 94% in 2003 to $1.9 billion, but growth is expected to slow from 45% in 2004 to 16% in 2007. As long as Google remains so heavily dependent on a single search market, it should trade at a discount to Yahoo, says American Technology Research Inc. analyst Mark S. Mahaney. Citing its quiet period, Google won't comment.
Google co-founders Sergey Brin and Larry Page aim to expand into new businesses, but that won't be so easy. The most obvious foray would be into so-called branded marketing, the multimedia ads that adorn most Web sites. Unlike the text-only ads that accompany Google's search results, these snazzier ads entice large advertisers that are as concerned with building brand as they are with driving traffic to their sites. It's big business, worth about $4.5 billion in the U.S. this year, according to Forrester, vs. $2.8 billion for search ads.
Google, however, is a long way from proving itself a player in branded marketing. Sure, the six-year-old company is tinkering with a trial program that delivers targeted image ads from its roster of 150,000 advertising customers to other online content providers. But Google has not hinted at near-term plans to open up its own prime real estate for branded ads. Such a risky move would run contrary to Google's long-established mission of providing a sleek, simple page that favors speed over sizzle.
Even if Google does pull the trigger, it would desperately trail such rivals as Yahoo, Microsoft's (MSFT ) MSN, and AOL (TWX ), which have spent years building their salesforces and relationships with traditional marketers. Although Google points to its 150,000-plus advertisers, buyers of search ads often aren't the same people who buy branded ads. "The people who control these budgets are very different," says Wenda H. Millard, chief sales officer at Yahoo.
Google's management structure could also be a concern. The company prides itself on an organization that is nearly devoid of middle management and values freedom for engineers and their work. But Google's headcount is growing faster today than at any other time in its young life -- adding 3.
Another 'big guys wanna screw us' article.
Who cares, the current task is to raise as much money for google as possible. Success will be raising more this way then a similar typical IPO.
When they sell underpriced shares, the company doesn't make as much as it should. This hurts the company as it doesn't get as much money as it should, and the existing shareholders, as they don't get the maximum value for the new shares they issue.
Who cares what "Wall Street" wants, it is the owners who matter.
Really, the IPO process is something that'll make a few people happy and a few people not so happy, and then will just plain be forgotten about. The differences between the dutch auction and the typical IPO process will matter in the days immediately after the stock comes out, but then will just fade into the background as the market determines the actual value of the stock through day-to-day trading activities.
.com's that ulitimately crashed and burned, but I don't think it'll have any effect on Google's stock in the long term. Most of us normal people invest in the stock market for the long term, and should in general wait for the post-IPO price to become stable before deciding on if we want in on a particular stock.
It's an "in your face" shot to the IPO industry that profited on the
Of course, if the reason is because then then Wall Street will ignore the stock and no institutions will recommend it, well, maybe that's a great reason not to do this. After all, it's not uncommon in other contexts to pay a 7% commission to someone who can get you a good price. I guess we'll have to wait and see whether not giving the Wall Street folk their usual vigorish is worth the risk.
Disclaimer: I work for a company, but I don't speak for them.
There was a recent slashdot article about predicting financial patterns. Google has the tools and personnel needed to pursue this if they wanted to....
They could have gone out in an IPO six months ago, when the market was literally ready to pay anything to hold Google shares, but they let it get stale in the public mindset, the cover stopped, and the market slipped below its 200 DMA. Now Google goes out in what may be a new bear market. Congrats guys!
Let's just put it this way... Neither the United States nor China nor any other nation will be the next group with someone on the Moon.
These market makers have just as much contempt for the individual investors. Wall Street is all about the control structure and every level of it getting its own piece independent of whether anyone else is making money. You will see these fights as attempts to use technology to get real free and fair markets steal more and more power from "Wall Street." They're like the RIAA protecting their financial distribution networks from outsiders who seek to streamline all the crap between the buyer and seller.
Seriously, the tinfoil hats really needn't come out over this. You're slipping, Taco.
It's a MS article defending Google?! O_o The world will be ending in 5 minutes, please save your work and logout.
I for one as a day trader, will not be purchasing GOOG for a long time.
It figures. Day traders do no good to the companies they invest, other then to demand immediate profits at the expense of long term solubility. Good riddance.
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.
This sig has been deprecated.
"Investment bankers fear the "Dutch auction" IPO, if successful, could severely diminish their power and influence, and that has a lot of people on Wall Street worried and more than a little angry. In just about every interview they give, Wall Street sources are actively campaigning to undercut the IPO, warning the public that the stock will be overpriced, and instead of appreciating in value after the offering, will actually retreat."
Yeah, if there's anyone on the planet that i feel sorry for it's the investment bankers and their pissy little attitude b/c they aren't "in the loop" and google isn't bringing them into the "good ol' boys circle". Damn shame i tell you.
Note: not a chance in hell, i'll pay that much for google stock though. Not a chance.
Cheers,
Erick
http://www.busyweather.com/
related articles on MSN:
Sept 15: Using Google Gives You Gonnorhea
Feb 8: Stock Tips: Redhat Stock Endorsed By Satan
Even the linked msn article doesn't support this interpretation of IPOs. It merely says that the middle men price it lower so the investors won't feel like they've been screwed when the overpriced stock drops like a rock after the IPO and refuse to do business with them in the future. It does not follow that somehow the little guy is getting screwed. This is just sensible business practice on the part of the investment bankers.
It's fine to want to keep "big business" in check, but if you just throw out absolutely anything that appears to support your case, you just look ridiculous.
-- d'arcy poirot
In a traditional bookbuilding IPO, the discretion employed by the underwriters ought to eliminate problems associated with information asymmetry, and ought to decrease average levels of underpricing. This should consequently result in the underwriter maximizing the issuer's initial capital gains. Nonetheless, this lies on the assumption that there are minimal conflicts of interest, and that these interests are controlled. Loughran and Ritter (2004), however, found that underwriters quite often will allocate shares on the basis of previous business with certain institutional investors. The "dot con" was a perfect example of this.
At times, these investors would also have to give commissions back to the underwriter in return for share allocations in some favorable IPOs. It can therefore be argued that the underwriter also has incentives to not act in the best interest of the issuer, and we can clearly see this when the average underpricing of a stock is significant.
One of the risks of using the auction is that those who bid very high can potentially corrupt the process, and cause inaccurate pricing. What may occur is that an institutional investor could bid at a (significantly) elevated level to ensure a share allocation. Their bid may not be representative of what they consider the value of the company to be. Nonetheless, if bidders are considered rational economic agents, high bidding will not only occur with a few investors, since people would expect a large degree of high bidding. This would therefore be incorporated in their valuation of the issuing company. Hence, the argument that if everyone overbids that the IPO will be overpriced may not necessarily be true in all circumstances. And Wall Street hates this theoretical implication, and the fact that they lose their leverage.
Which is probably why Google crawls Yahoo Finance pages for much of its related data.
The people with most of the money in the world don't like this idea, because it threatens their power, and they are likely to do more than just spread rumors to derail any such thing.
There are a multitude of ways to depress a stock price. As Warren Buffett has said, in the short term, the stock market is a voting machine, and in the long term, it's a weighing machine. The Guys with the Money have a LOT of "voting" power.
Over the long haul, this won't work -- you can't artificially hold a stock worth X amount of money very far below X forever. But they don't NEED forever. If they sell short, bigtime, and can hold the price down for a year or so, then they win... everyone thinks Dutch Auctions are a losing proposition.
The guys doing this could very well take a serious bath (short sales and derivatives are dangerous), but they may figure this as a cost of doing business.... if this idea takes hold, it could cost them a lot more than the few hundred million dollars they might lose on this manipulation.
Because of this, I fully expect that the Google IPO shares will drop fairly dramatically once they go on public sale. Personally, I'll be looking to buy in the aftermarket.
How does your site stop people from running pump and dump scams?
Please answer because your site looks like it could be used to run one hell of a pump and dump.
And you might want to proof read your site. It has more than a few typos.
Sure but Google doesn't have to go public in order to get rich by analyzing financial patterns. What you say has nothing to do with Google's IPO.
Search, contextual ads, bigger mailboxes...Google could have beat all of these to the IPO. No matter how you slice it, they waited too long.
M guess, there is going to be a behind the door compromise, much like insurance. FYI, an agent gets a good chunk of your premium as commision, but if a company goes direct to the customer, thus cutting the agent out, the agents threaten complete boycot. So, under the compromise, even if you deal directy with the company (Gieco, Progressive, you name it), the company assigns the 'sale' to an agent who gets the commission based on your address.
Of course, we happily think, we are getting a good deal, when in fact the agent gets all the benefits without spending anything.
Don't be stupid. "Don't Be Evil" doesn't instantly mean "Don't Be Smart". They know what they're capable of, and earning lots of cash is a pretty obvious thing.
With google's ubiquity in almost everyone's daily internet life, the potential for misconduct is staggering. The fact that they haven't abused their position yet makes me proud of the fact that i can afford exactly 1 share of their stock right now.
Speaking as a trader specializing in shorting stock, I would never short google. It might be overpriced but so was Ebay, yet stock kept rising. You just dont short companies which are monopolies or dont have strong competiton. It might be overpriced when, it opens, but with time it will do fine. As long as people continue to search and click those ads.
And they will.
Stop trying to astroturf. You're not fooling anybody.
Your logic is neither interesting, nor particularly well-informed.
Google's "Do No Evil" mantra is almost certainly another reason why Wall Street wants them to fail. A sense of morality is practically anathema in today's Fortune 500 world. They don't want a company that is not easily tempted by money at the cost of (employees' livelihood|third-world workers' lives|anything else worth protecting that isn't money) to ascend to their misty eyrie.
Honey, I shrunk the Cygwin
Google will a very complete picture of what people are talking about at any given moment once Gmail goes up for the general public. They don't have to use your personal information but they can reduce it down stats about what stocks/markets people are talking about and their opinion of them. They could use this information from both the web and gmail to build probably the most accurate market prediction mechanism ever created. Perhaps that will be Google's new trick in the future.
To stay competitive a country cannot afford too many people earling lots with little to show for, and with the internet their function is largely defunct.
So how long be for politicians get replaced by the internet - since their main function is to take money from corporate interests and pass legislation why not replace all that with a web-form?
This comment does not represent the views or opinions of the user.
That's why I don't think you can trust anything Wall Street says about the Google IPO: The investment banking establishment has too much at stake and too many institutional conflicts of interest to make them credible on this offering.
I've been saying this since day one. The great thing about the Google IPO is that it puts the market back into balance - remember, shares are *supposed* to be valued based on direct investor demand, not insider deals and analyst payoffs. The Street will do what is in *it's* best interest, which means controlling the market (ahem, not a free market then eh?)
Not only is Google doing the auction to avoid insider deals (and keep that cash in the family), but it's spreading the offering among many, many different brokers, even progressive discount brokers [/shamelessplug]!
Definitely *not* evil
"Whoever would overthrow the liberty of a nation must begin by subduing the freeness of speech."--Benjamin Franklin
From reading the reports of the investor roadshow, the Google guys weren't even taking the whole process very seriously. (see WSJ last week).
So you decide to give the instutitions the finger with your prospectus, make a convoluted system to order shares, price it into the stratosphere, scare away the big dogs, then wonder if the little guys will show up in quantity to make the IPO happen?
I don't buy that this is entirely the fault of the institutions. Google seems to think they're better than the rest of us at times (check out the recruiting ads). I don't exactly frown when I read these stories.
ECONOMICS IS NOT A SCIENCE!
*ducks behind a bush, but peers over to watch what happens*
The Google IPO reminds me of the Virgin IPO in the 80's, not so much for its format but for the people it may attract.
Public companies reap the biggest benefits from having institutional investors (i.e. mutual funds, other big companies, banks, etc.) buy in their stock. While it sounds like a nice and noble thing having lots of individual investors buy your shares, that's usually not in the best interest of the company and its underwriters. Why? Because they aren't likely to buy the same volume of shares, even when combined, as a group of institutional investors. Individual investors are also more fickle and likely to dump the shares at the first sign of trouble.
In Virgin's case, people loved the company, just like Google. Lots of individual investors bought the shares but few institutional investors participated. The IPO thudded and Virgin never quite took off in the markets. The company took itself private a few years later, and has been private (and profitable) ever since.
Something similar may happen in Google's case if the company fails to attract institutional investors for whatever reason, whether it's the high price of its shares or financial analyst buzz. I believe this is the real issue behind the IPO jitters and its unusual format. The last thing the markets need is the most hyped IPO in years landing with a baffled thud.
Comments, anyone?
Eugene
http://eugeneciurana.com | http://ciurana.eu
Looks like I haven't mastered the art of getting people to stop taking everything so seriously and have fun every once in a while :-(
To think that all companies doing IPOs could pull off a dutch auction is simply absurd. Only with heavily hyped companies like google is there guaranteed to be enough capital to eliminate the need for the underwriter to offer a little extra cheese to the people (preferred customers) to get them to invest the capital to buy the initial shares.
Amazing magic tricks
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.
Buying lots and lots of 1GB hard-drives?
This comment does not represent the views or opinions of the user.
That's the point of a dutch auction - they're not demanding anything. They're holding a dutch auction to determine the fairest price, and that's what they'll sell at.
What is the robbing of a bank, compared to the founding of a bank? -- Bertolt Brecht
Sorry, ran out of mod points yesterday :(
Interesting links.
Of course the big brokerage houses are cool on Google because they see it as a threat to their powerbase and it has nothing to do with their P/E ratio of over 100 and a lack of voting rights for the shares.
It seems to me that the market makers aren't big on Google because they don't think they'll make a lot of money on it. If it ends up in the hands of individual investors primarily that will probably make it a worse bet due to the fact that they're much more volatile.
Good, glad to hear it! Anything that cuts out their obscene profits is OK by me, even if it's only 1/2 cut out. They don't deserve it, don't work much for it, and the system is thoroughly corrupt anyway. Insider trading is the norm, it's not the exception, they just keep getting better at developing ways to obfuscate how they pull it off.
Wall street NEEDS massive reform. People should be able to buy shares direct, with NO COMMISSIONS. We don't NEED middlemen skimmers and manipulators and shills for "stock". And the next step is a mandated lawful minimum transfer time period of at least one year, to stop gambling and day trading speculation, help eliminate boom and bust cycles and "irrational euberance". Make the stock "market" turn back into investing like it's supposed to be and not poker chip trading based on ridiculous voodoo wave theories and astrology and "nightly business reports" corporate brokerage shilling.
And then, HONEST MONEY based on actual quantifiable tangible assets, not poof created "credit". SCREW the central banks, buncha outright scumbag thieves. No one "owes" them any "debt". They have nothing to actually loan except digits they create out of thin air on computers.. It's a congame, always been a congame, always will be a congame. They aren't respectable businessmen, they are pirates, hijackers of peoples wealth and productivity, crooks. As far as I am concerned they should be charged with capital T treason.
IPOs are priced low to avoid a situation where the IPO ends up being overpriced, which can result in lawsuits. Erring on the side of caution, if you will. Technically, underpricing isn't any better than overpricing, but buyers tend to complain less (when's the last time a monopoly was sued over undercharging its customers?).
Good. You day traders are a blight on the investment business.
Google has at least three good reasons to do its IPO now.
1: Microsoft is preparing to enter the search engine business in earnest. They have very deep pockets, and no compunctions about stealing technologies, so Google is going to take a severe profitability hit even if they win the war as expected. Such battles cost money: Google needs enough money to not run out of software and hardware development and maintenance funds.
2: Some Google patents, important ones, are running out in roughly 2010. It's good for the CEOs and VPs to cash in their stock optiions while it's at this peak, rather than wait for it to start dropping as other companies their attempts to create "Google-killer" technologies. Even if they fail, they will drive the value of Google's services.
3: They've about saturated the search engine market. This is why they've recently committed to entering the email market, which I wish them success in, but it prevents them from growing much more in terms of profit in the search engine market.
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!
You forget that it is risky and politically sensitive bussiness. It is a bit unsafe to have profit of.
They prefer to keep reputation of honest high-tech enterprise.
Damn!
Than what have I been studying for the last 4 years?
Seriouslly: Economics *IS* a science. The only problem lies in the fact, that it is more of a social science (like sociology, philosophy) than a fact-based science (mathemathics, physics...). Saying economics is not a science is like saying pyhiatry is not a science.
Economics is a science that tries to determine how people will act based on the previous emphirical data. That's why you'll get 7 different answers if you ask 7 different economists for a forcast.
boky
So, then, we can safely ignore any posts by Ars-Fartsica because a commercial entity must, by his definition, be evil.
Stupid sexy Flanders.
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.
there are a lot of posts for htis article talking about the inflated value of google's stock based on their intake of yearly revenue.
yes, i agree that the google price per share is higher than it should be.
that said, how much is the technology that drives their search worth? 36 billion? probably not... but it certainly is worth a lot. the problem is, if they start selling it to third parties, does the total value of the search software as IP for google increase or decrease?
it seems like exclusivity is their strength and weakness to me.
i think the problem i am running into here is that i don't know enough about the stock market and how it works to figure out how they place value for a company just coming to the public party.
scott king
Google's management structure could also be a concern. The company prides itself on an organization that is nearly devoid of middle management and values freedom for engineers and their work. But Google's headcount is growing faster today than at any other time in its young life -- adding 3.6 employees each day so far this year.
This form of management could proove to be a problems since it is a significant cange from the traditional whips and shackles form of management. We would not want anything innovative coming out of a place like google now would we!
I especially like.
Google's management structure could also be a concern. The company prides itself on an organization that is nearly devoid of middle management and values freedom for engineers and their work.
humm maybe they should treat them like flying monkey poo and wall street will be happy with 135$ .
Ambient [Servlet Based Webapp Engine]
I don't think the point is that a commercial entity must be evil, but instead must not necessarily be good. As I've said many times before, the average publicly-traded company is not designed to be a benevolent voice for the consumer, it's designed to make money (in the vast majority of cases, in a legal manner). Anything "good" they do is purely designed to bring some tangible benefit to the company. Case in point: the Microsoft agreement to donate software and computers to schools. But, guess what? They're all Windows based! They're locking schools into their platform while looking like they're nice to the general public.
Want Slashdot headlines on your site? Try SlashHead
This article shows how the press only has a one-month attention span. In 1999 people were writing nearly identical articles about Salon's auction IPO.
Once a company is public its no longer quite the personal fiefdom of the founders/insiders that were running it. Yes a traditional IPO leaves the company a little devalued but as a side effect it buys the management wiggle room. Investors , that their shares in the toilet from where they bought them are much more susceptible to a buyout offer or just changing the management than those that have a tidy profit.
The real villian here is not the "Underpricing of IPO's", its the process of awarding the shares to the priviledged few as a perk. These people will hold the shares for as little as a few days and take a quick profit. They contribute little to the long term and just serve to get in the way of the investors that have a belief in what the company is doing.
Giving IPO's as a perk to insiders also serves to shove the fact the system is biased against small investors right in their face. This undermines investor confidence in financial institutions and weakens the overall financial system.
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?
The fact that members of the social "sciences" go around using the word "science" is a marketing ploy and nothing else. These folks are hoping that their audience will miss the point : that the cornerstone of modern science is its ability to accurately predict based on theories. If a scientist predicts event E and based on theory T and E happens once for one set of input, and for the same set of input to T, event F happens another time, the scientific community will acknowledge that the theory T is broken. This doesnt happen in the social "sciences". The strategy there is to say "well we are dealing with humans after all..." . Perfectly true, but it is equally true then that they dont have scientific theories and therefore shouldnt be calling themselves scientists.
This was exactly the point of Alan Sokal. The sham philosophers and other social "scientists" were misusing the scientific vernacular in totally unscientific ways to gain credibility in the eyes of the world. Just because economists use mathematics, doesnt make their discipline scientific.
There is no such thing as luck. Luck is nothing but an absence of bad luck.
"Some Google patents, important ones, are running out in roughly 2010."
Huh??
Google was awarded patents in 1990??
Come on... it's sunday evening... and i'm at work... and been working for some time now... and my brain doesn't move the fingers in the way it is supposed to...
boky
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.
Another "cool guys with cool technology that Wall Street can't understand" IPO. Must be rerun season.
Two years from now, I predict:
- Google's stock price will be under one-tenth of its first day IPO price
- Brin and Page will have lost control of the company to the marketing suits, who will be planning to sell the company assets to an Indian firm.
- Small investors will be whining on Slashdot.
Just go to MarketWatch, last week's Economist (subscr.), and a whole load other places and they will all tell you how short sighted this MSN article is. Yes, it will avoid the pop. But that does NOT necessarily make it better. The way it's being conducted now, it remains to be seen.
= +
US patent law is fairly weird, but it does not involve time travel.
According to my acquaintance at Google, Google owns them and they are expiring in the foreseeable future. This does not mean that Google created them in 1990, anymore than SCO ever wrote any actual UNIX source code simply because they now owns the copyrights. It means they bought the rights to that intellectual property, either as a licensed user or that they bought the patents outright.
I'm starting to get sick of goody two shoes Google. I want them to fail as well actually. I'm sorry but let the Google backlash begin.
Support the First Amendment. Read at -1
So do Microsoft, IBM, and a few other gigants. But I don't think that is anything to fear...
Simpy
Anyone wo calls an IPO at $130 underpriced Must be an idiot! At $130 there is nowhere else for this mutherfucker to go but down IMHO.
It is. It is a subcategory of psychology.
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.
Because you can make a bid on as little as 4 shares, and get it right off the bat, at the same price as the guy who bid for 4000 shares.
Saying economics is not a science is like saying pyhiatry is not a science.
Well, you said it first...pyhiatry is NOT a science. Never heard of it and neither has Google.
Finance is not a science; economics is.
-russ
Don't piss off The Angry Economist
Were talking corruption here, how reliable does it need to be?
I've often thought politicians should be treated more like juries - they bloody well shouldnt be talking to the prosecution behind everyones back, brown envelopes or not.
This comment does not represent the views or opinions of the user.
Sorry, but chaos theory prevails here. There is no way in hell that anyone is going to predict the stock market activities using a formula. There's too many varaibles that interact in unknown (possibly unknowable) ways. It's like the butterfly effect. It has it's roots in the quantum nature of the universe.
We live in a roiling sea of unpredictable happenstance. Enjoy!
Cheers.
1) $550 is peanuts if you're serious about investing. Maybe it's not worth it if you just want a stock certificate to hang on the wall, but whatever. If you think it's going to slide to a "more realistic" valuation, you're free to pick it up after the IPO, whenver it gets to a price you find more reasonable.
2) This is how they intend to keep their "Don't be evil" policy in spite of Wall St. demands. It may seem to devalue the stock in some sense (e.g. what am I buying really?) but frankly, I don't *want* Google to sell out.
3) Again, you don't have to buy it the second it comes out. You don't have to be first. If you expect the market to adjust it downwards, buy it then. OTOH, if enough people expect this, then there may well be more of an upside to it than was expected...
4) All stocks are a gamble. Right now, Google has quite a premium on it's Adwords, but they are, hands down, pretty much the BEST internet advertising there is to be had (save maybe slashvertisements...).
Now there are dangers to Google--the nonsense about trademarks & people using them as Adwords is one worry. Another is that Microsoft will use their monopoly power to force their crappy, slapdash search engine upon us all. Competition is a worry in any market. I don't know what they can do, but I know that Google can compete and I know that they can turn out a superior product.
Frankly, I want some of the stock to put my money where my mouth is--as a vote of confidence in Google--and I'd be the type to hold it long term, rather than cashing out whenever things look bad. None of us have any way of knowing how things will turn out. Microsoft or trademark law may well spell doom for Google. Conversely, they may manage to embed enough Google in windows through programs like the Google toolbar to resist even Microsoft's efforts to eradicate them. I mean, 'google' is already a verb, I don't put standing up to Microsoft past them at all.
ECONOMICS IS NOT A SCIENCE!
Just have to say the word moron.
Yes, in fact, it is: The most prevelant definition, http://dictionary.reference.com/search?q=science clearly makes economics a science.
You're slipping, Taco
So I take it you haven't been reading slashdot very long.
BA-DUM CHING
Irritable, left-wing and possibly humorous bumper stickers and t-shirts
Do you have AIM or ICQ?
Who are you responding to? Neither the article, nor CmdrTaco's summary at all say anything about the "little guy".
The complaint here isn't that the current IPO system screws the "little guy".
The complaint being lodged here is that the current IPO system screws the company, while disproportionately helping those who are well-connected. In other words the complaint is that the current IPO system represents a way for the company board, as well as persons with connections to investment firms, to embezzle gobs of money from the company going IPO itself by lowering the amount of money that the company receives from the IPO sale in order to cause their bought-before-the-public-gets-a-chance shares to become fabulously valuable.
Irritable, left-wing and possibly humorous bumper stickers and t-shirts
When I read the article, I noticed something odd:
I sat down and started thinking about the implications of being allowed to increase the number of shares in a dutch auction, and I came to an interesting conclusion: I think this this is a loophole is equates to fraud. Let me explain:- Start by assuming that the share price offers have a normal distribution (or at the very least a somewhat symmetrical "triangle shaped" distribution -- low on the high and low, peaked near the median)
- In order to maximize the IPO, we compute the number of offers above each dollar amount and multiply it by the dollar amount. Clearly we want the peak value. Now I'll state without proof (you can try it in excel if you don't believe it) that the maximum occurs on the "upward slope", below the median. And the maximum score typically comes in at around ~50% above the score of the median offer.
- One interesting fact is that as standard deviation of the population of bids increases, the peak score decreases. A consequence of this is that the IPO value is actually reduced by vastly differing opinions on its value. (e.g. if everyone thinks shares are worth $120-140, then the company will make make more than if the offers ranged from $70 to $180.)
- Another interesting fact is that the people who made thier bids did so based on their perceived values of a tangible asset: x% of the company up for IPO. When you increase the number of shares, you dilute the value of the asset, and you actually invalidate (or at least linearly scale) the bid. However, I've seen no mention of the bid being scaled by the increase in shares offered.
- From the mathematics of the problem, it turns out that it's in the company's best interest to initially offer a low number of shares and then raise the number of shares after the bids are received. If the company is allowed to raise the number of offers based upon the known bids, and if the bidders have no ability to reject the final price, then the bidders can get stuck with less ownership of the company than they originally bid upon (for the same price).
- For the sake of illustration, I'm going to give a really exaggerated example: assume the company initially offered 1000 shares and gets 5000 bids. The company then computes the maximum IPO comes if they sell 4000 shares. Suddenly everyone finds that their bids were 4x too high, and there's nothing they can do about it.
So I have a serious question: Is Google allowed to arbitrarily raise the offer number without reducing the sale price accordingly? If so, then I can almost guarantee they'll opt to maximize the intake (thereby defrauding the new shareholders). Can someone who knows about SEC rules comment on this?p.s. Another question: What happens if there aren't enough "normal" bids and it turns out that some billionaire offered $1/share for 25 million shares? Does everybody get their shares for $1 each?
How does the price of the shares matter? Google could do a 4-way split and drop the price to, say, $33.
Split's do not change the value of stock. They SPLIT the value among more shares. Everyone who had 1 share gets 4, even the people who own non-IPO shares. A four way split is like getting four quarters for a dollar, no change in value.
If as the grandparent sugested it's overvalues by nearly 100% then it's as if I tried to sell you a dollar for $1.75. How would selling you four quarters at that price instead help? You'd just be getting a bad deal in four pieces!
I personally don't know if it's a bad deal, but you don't even seem to know what a share split means.
A science is a field that is pursued using the scientific method, not just something that "uses math".
So the article here seems to be saying that traditional IPOs invariably choose a structure that purposefully causes the IPO price to be undervalued; and Wall Street is pissy about Google's IPO because they chose a structure that does not purposefully cause undervaluation, and Wall Street benefits from undervaluation. However, what the article neglects is the possibility that Google's IPO structure has accidentally overcompensated and overvalued the IPO price.
So I've been trying to figure out: What happens to the Google stock price after the IPO?
Because $120 seems pretty clearly to be a silly price, at least compared to other stocks. I don't really think many people are going to want to buy at that price.
But, the thing is this. People know this ahead of time. No one is expecting the price to skyrocket immediately after stock launch. This means that, as this guy notes, if someone is buying Google stock at IPO they're probably buying it as a long term investment. At the very least, if you had just spent however much ridiculous amount of money that you have to spend to be one of the initial buyers in the IPO, and it immediately after IPO sinks $20, are you going to respond by going "oh shit, i'd better sell it now!"? No! That would be stupid! You sell at stock peaks, not valleys-- doing otherwise would limit your participation in the IPO to just throwing away the $20 per share you bought.
So the thing is this: demand for the Google stock at IPO time will likely be very low. But supply is also likely going to be very low-- because likely, and especially likely if the stock price sinks immediately after the IPO happens, the people who bought into that IPO won't be interested in selling what they have. So what does this all really mean for the stock price? Will the overvaluation be cancelled out by the fact that the IPO will attract the sort of people who won't want to sell what they just bought for a long time?
Meanwhile someone in the thread I just linked claimed that some people will be signing on to this IPO for the purpose of sabotaging it-- I.E., we'll see a fall in prices immediately after IPO launch because the big investment houses will be manipulating the stock down in order to discredit the dutch auction method. But if this is the case, once this manipulation-based fall is finished-- and it can't go on forever-- won't we immediately see a really large bounce in the other direction? If people are now widely expecting a drop in Google's price to occur immediately after the IPO launches, then doesn't this mean that anyone who wants the stock, but isn't in the IPO, will be operating on the strategy of: Hold off on buying at IPO launch, then wait for the inevitable post-IPO stock price correction to happen, then as soon as the price seems to have stabilized at its lower, corrected price, then buy. In other words, when the minima of Google's stock's first big dip occurs, it seems likely that a small flood of new interested buyers will come into play, possibly even triggering a rally.
Beyond this: the whole "options" thing. How does this work out? As far as I know the way this works is that a bunch of the people who work for Google, as well as Google's original VCs, have the right to buy the IPO stock at a price well below the actual IPO cost. Is this right? If so, then these people will likely be wanting to clear out as much of this stock as possible as soon as possible, right? Does this cancel out my "there won't be many sellers at IPO launch because of long-term investors" theory above, because the investors won't be providing supply for the stock at IPO launch, but the optionholders will be providing lots of supply? How significant of a proportion of shares will the optionholders hold within the greater block of google stock available?
One last thing: Does Google even care what happens to the
Irritable, left-wing and possibly humorous bumper stickers and t-shirts
They want to get rid of the day traders. That's it.
The normal mantra of the day trader is to buy and sell in lots of 1000. They usually go for the lower priced stocks that have high volatility. By pricing the shares > $100, it means that most day traders will not be able to day trade on Google's stock.
Good for them! The day traders are the ones that usually ramp a stock up and down, especially the IPOs during the dot-com boom.
As well, by pricing the stock so high, they are really forcing people to think twice about investing in Google. Again, good for them! They have said repeatedly in their prospectus that the price of the stock could go down after the IPO, and I believe it.
I'm going to by 25 shares at the IPO, and see where the price goes. I'll top up to 100 shares either way, but I don't want all my eggs in the IPO since I believe that the price will drop.
As well, I hope they do as what was rumored and never split the stock, a la Berkshire Hathaway. In 20 years, I'd love to see the stock price in the thousands.
$105-130 is too high a range and makes it completely speculative.
That's silly. Google can always split. Market cap is what matters, not per-share prices.
I hate per-share prices. They're an artifact of trying to provide a number that could be tracked manually back before computer days, and the degree of misunderstanding over basics of the stock market is staggering. I wish that price changes were listed as percentage changes, not as per-share-price changes, and that companies would talk about bleeding market cap at their IPO, not share prices.
May we never see th
The question I was attempting to pose was, who is DP responding to, since otherwise he appears to be the one bringing the "little guy" into this?
Irritable, left-wing and possibly humorous bumper stickers and t-shirts
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?
Well, this is the kind of BS we read every day in the "professional" newspapers. And now - the same from a daytrader...
Suppose I am selling something ar the auction and tell everybody: "I think this thing is worth $100, but I am going to sell it to the highest bidder with a $0 starting bid". What kind of people will come shouting: "Why are you demanding $100, it's too much!!!":
a) stupid,
b) with a hidden agenda.
Make your choice.
in light of the new REPUBLICAN sponsored bill to eliminate the IRS in favor of some kind of national sales tax (which i'm in favor of personally, although it will make it easier for these huge companies to get away with all kinds of shit on their financial statements unless the SEC is given some more enforcement power)
Unless you can test a hypothesis and come up with verifiable, repeatable results, you're not doing science.
Economics and social "sciences" cannot come up with verifiable, repeatable results, because any model of sufficient complexity to mimic the thing being studied is just as complex as the thing being studied.
You can't do controls. You can't isolate influences. You can't do the same experiment twice and get the same results.
Economics and sociology are important fields of study, but they are not sciences.
Why yes, I AM a rocket scientist!
d'arcy here is a lady, mcc. perhaps you've seen them in class.
as for your question, it's adequately addressed in the parent. please reread.
-- d'arcy poirot
Correct. But not in the way that you imply. You cannot do this mostly because you cannot do the same experiment twice. Heck, you cannot even list all of the input conditions (since these include all the knowledge/opinions etc of all the humans involved) let alone replicate them.
" Unless you can test a hypothesis and come up with verifiable, repeatable results, you're not doing science."
By this strict definition, quantum mechanics is not science. An electron, in some specified condition, has a chance of tunneling through some barrier. We can (at least in simple situations) calculate this chance exactlly, and verify that this calculation is correct. But you cannot predict in any way when, or if, it will do so. The when of it is not repeatable. Does this mean it is not science??? No.
Laws are horrible moral guides, moral guides make even worse laws.
Re: your first paragraph: Yes, you're right. That means you're not doing science.
Re: your second paragraph: Since you can't use the scientific method in quantum mechanics, it's not a science.
It is, again, an important field of endeavor, but not the same as "science".
Why yes, I AM a rocket scientist!
... I don't troll, it's my honest opinion on those matters. And banks would become increasingly irrelevant once the scam of poof created money and fractional reserve was eliminated. They are part and parcel of the scam, allowed to loan that which they do not possess in actuality. Usury is one thing, but usury based on loaning which you don't even possess in total? That's a compound scam and serious "wrongness". On a small scale it's called buncoism, so I think the same term should be applied at those lofty levels, because it's the same exact thing-fraud.
My idea on money I posted here before, but here's a basic simplified nutshell gist of it.
First, be clear on the difference between money and wealth. Wealth is either the land itself, what can be grown from the land, extracted from the land, or manufactured from any combination of the last two, and that's it. Money is a portable representation of that wealth. Using "debt notes" like FRN's is a scam and should be eliminated, it's a horrid example of a money system, primarily designed to keep non workers in the central banking system forever as creditors and every one else in debt to them. It is in no way based on wealth, so, as such it doesn't even represent money, and they don't even claim it's money, it's technically a "note", although in common parlance it's still called money.
Money supply would be regulated by taking into account the top 100 commodities produced and traded in a nation any year. 100 is nice because it's a good enough and large enough representation of the diversity in business, it's the number we are all comfortable with, and it wouldn't result in any changes to accounting or day to day business. Yes, the base representations of which can be gold and silver,it's the LAW by the way that it should be, fed reserve act not withstanding, because they are universally recognized durable goods of worth and have been used for money for thousands of years in all socieites and cultures. Don't try to fix what never has been broken in other words. Our mint still makes them, no reason to abandon the concept, but they don't necessarily need to be used in day to day transactions, they should just be there for those that want them or as a way to do long term storage of portable wealth. How much a particular coin is worth can be adjusted once you set an official starting point standard, currently we call an oz of au 50$, of silver one dollar, etc. Then the supply number of the day to day commodities based currency is adjusted up-or down- based on if the nation actually grows real wealth, which it usually does to some degree anyway. The nation bases it's dollar that's used day to day on those top commodities. In other words, true wealth must be created before a digital representation can be applied against it, 180 degrees from what we have now which is highly inflationary and in no way rational. what are we now, trillions in alleged debt? That's nuts... Never would have happened if the only thing that could have been borrowed had to be tangibly there in the first place. You can't borrow what isn't there, so it would force governmental and societal rationality back into the general economy.
As business and society changes, the top commodites used can change with it,they don't have to be carved in stone, for example the sterotypical buggywhips can drop off the scale when they no longer make the top 100 cut of useful tangibles and something else replaces them, whatever it is.. We already tabulate and account for them, so the records are already in place to do this. The money supply is strictly regulated on the actual produced wealth that the nation has made the year before, so the supply can be adjusted *exactly* up to that point to add to the totality of -dollars/digits/units- in existence. No more having some private bank called the fed decide for us what the supply should be based on what their drinking buddies need that quarter. Honest pure business, not created debt. It will match precisely what is really there then, no less,
Shouldn't you be equal opportunity and present the, "It's tough to be a Democrat" list? After all, you can be a Republican and think everything on that list is crap.
Just like how you can be a Democrat and think Hillary and/ or Diane are insane.
There are four boxes used in defense of liberty: soap, ballot, jury, ammo. Use in that order.
I'm afraid the only people to blame in the potential failure of the Google IPO are the google execs themselves. Their choice of using a dutch auction format would almost have worked well, had they not set such a high price range. Then, with the added negative news of "forgetting" to register 38mm shares with the FCC has turned their situation from risky into "just plain bad news." Wallstreet merely responded. THe underwriters haven't gone anywhere, and they arnt trying to make it hard for google by any stretch. Dont forget, it's in their interest for the IPO to go as smoothly as possible. In fact, before things all went to hell in a handbasket, wallstreet was really looking forward to this, hoping that Google's IPO would revitalize the IPO scene. But they will not give bad advice to their clients regarding the acquisition of the stock. That would be manipulating research. And lets face it, given the present situation, buying google on the IPO would be bad advice. Wait a couple months at least, if not more. You just dont know what else might come out of the woodwork. IMHO, google just isnt ready for this, wallstreet knows it, the public knows it, and even the "true believers" will know it soon.
This IPO will be a disaster.
But that's not what the parent to my response said... "Do no evil? Get real, it's Google.com, not Google.org...", which not only implies that a commercial entity must be evil.... and also wrongly implies that a non-commercial organization must not be. That's ridiculous.
But I ask this, too... why is it "bad" to want to make money? If you do it in unscrupulous ways (like MS), then yes, it is bad, immoral, even if it is legal. However, the truth is, the VAST majority of companies work very ethically... the ones you read about in the papers are a tiny, tiny minority of the companies out there... even if they don't do it for the "greater good", it's only because Karl Marx is dead, so let him rest peacefully. Just kidding... really, most companies fall under a "neuteral" category, and by default "neuteral" is good because at least it's helping keep people gainfully employed.
Stupid sexy Flanders.
Dude, you've never heard of pyhiatry? It uses emphirical data!
(Umm, somebody's fingers are getting tired and need a nap!)
It's not offtopic, dumbass. It's orthogonal.
Dude, please promise me you're not going to bring in Gødel's theorem! It's a Sunday, for cryin'out loud! =)
It's not offtopic, dumbass. It's orthogonal.
[H]ow does it make money? Mostly by paid search results.
Actually, my understanding is that they make more money off of licensing their technology than off of paid search results. A lot of companies like to be able to search their internal documents without posting them publicly.
Shut your Pi hole.
It's not offtopic, dumbass. It's orthogonal.
If it were just percentage changes, then SCOX stock movement would be listed in blocks of +/- N*100%.
/_\% for the momentary stock price. If the delta is big enough, they will probably make it on to the "Big Mover" reports in the press, anyways.
Each method has its pluses and minuses, but in general, listing the trading prices merely leaves it as an excercise to the reader to figure out the
bah. traders and day-traders provide liquidity.
here's an exercise for you: take your favorite mid-sized company and look at the size of the float. and then look at the daily volume. then calculate from that what the average holding time for a share of the stock is.
anyway, you want the traders. believe me.
Okay, I see.
So what's Google's market capitalization? Well, um, I checked google...
For example, should Google really be worth $36.2 billion? Well, if the search engine giant, which unveiled pricing details and its ticker symbol (GOOG) Monday morning, begins trading at the upper end of its range, then that would be its market value.
That's comparable to Yahoo!, which currently has a market capitalization of about $37.8 billion.
So is that reasonable? I guess it is, I have no idea. The stock market still seems to me to pick these values out of thin air. If Google's market capitalization is less than Yahoo's, then I guess that couldn't be that unreasonable. Still, I find it amusing that that will be three times Apple's current market value.
Irritable, left-wing and possibly humorous bumper stickers and t-shirts
Having a stock double or triple on IPO day is a sign that the IPO price setters blew it... they could have charged double or triple in the first place and found people who would have paid it.
driving prices higher does not, in itself, show that there's demand. its a mechanism to create demand as well - namely from speculators who want to see prices go even higher.
you guys have not learned anything from the bubble. do not EVER think you're INVESTING when you're buying a stock with enormous valuation. never. ever. ever.
YHOO is no guide here: it could drop to 30% of its current price and STILL be wildly overvalued.
who is buying for the long term? that's no bargain ... its hard to imagine that its even within a small fraction of fair value.
I'm very interested in being intellectually honest.
This is not a case of politics as usual. The Bush administration is involved in widespread corruption. As I mentioned above, I put links to 3 movies and 35 books that all say that the U.S. government is more corrupt now than it has been in the memory of living people: Unprecedented Corruption: A guide to conflict of interest in the U.S. government. Some of the authors are former Bush administration officials.
I'm independent myself, but I like some of those who call themselves Republican. I like McCain. I like Giuliani. I can see both of them have their inner conflict and their shortcomings. I'm not expecting government leaders to be perfect. However, deliberately selling government power to special interests is different than being imperfect.
i mean, i'm supposed to pay to become part owner of a company, and my voice won't ever be heard? what happened to "no evil"?
sure, maybe you don't want to respond to the vagaries of the street. well, then don't pay attention to the stock price, sergey. but please, these shareholders are going to be the OWNERS of the company. if you don't want to share, then keep it private.
an ipo is a managed process. this is an experiment. the googlers wouldn't turn over design of their filesystem to morgan stanley. why should morgan stanley turn over design of the ipo process to techie weenies?
would be trading at such enormous valuations if not for the hedge fund and instituational speculators. how many years of high growth are priced in at a p/e over 100?
right now, volumes are down in this market, and yet program trading is rising - 53% last week. unless someone is motivated to buy and prop up the price, this could fall like a rock.
....)
although, the low float would give me pause before shorting. (i'm short yhoo now though
in the long term, a stock should be priced according to its earnings. for example. say you're buying an apartment building. hyou're going to rent out the apartments. how much is it worth to you? well, you figure out how much you expect to earn from rentals over the next X years, figure out how many years' worth of rentals you're willing to wrap up into the price (maybe 10 or 15) and then pay that much.
p/e ratios sort of represent such a quantity. if a stock is trading at 180 p/e, like google, then it will take 180 years of earnings for the company to earn enough to cover your investment. or roughly, you're paying for 180 years of earnings.
now of course, it gets more complicated if the company's earnings are growing. in that case, you have to factor that growth into the price too, since we're predicting the future here.
and in google's case, that's what you're betting on.
the total number of shares ultimately for sale is fixed. that is, you know how many shares of the company will come to market in the future because you know how many shares and options were issued. (well, additional options in the future will certianly dilute, but that's a different issue.)
.... plop ...
so really, the total number of shares that come to market is known. they're not increasing or decreasing the value of the shares by selling more or fewer. however, they might be able to manage the price by offering more or fewer. and this they can do initially by controlling the size of the initial float, and by lockup restrictions on the remaining shares.
however, once the lockups are over, its an open market: you know exactly how many shares will be eligible for trading. those who manage the ipo will hope to have a liquid market in those shares available by that time. or else
ebay and rimm have traded in this range, and it has hardly deterred the day traders.
in fact, day traders need to maintain a $25K balance, and can leverage $100k off that. if you're a successful day trader, you'll have significantly more available to you.
In 20 years, I'd love to see the stock price in the thousands.
...
if it goes public with a market cap of $33B, then for a stock price in the thousands in 20 years, you're expecting it to become the size of microsoft. in fact, at about $1000/share, you'd have something the size that microsoft is right now.
i don't see the risk/reward here as favorable to the investor
Visions of their deep positions in Microsoft, Yahoo, eBay, and Amazon slowly devaluing... But that has to do with the company and the product (the product being sharply focused Internet services that work brilliantly) not the stock offering.
-- @rjamestaylor on Ello
Ah, I knew the partisan sales pitch was coming soon. So the Democrats are the party of honesty and goodness, while the Republicans are in league with Satan and enjoy stealing candy from little kids.
It's far from obvious that "Wall Street" wants Google to "fail" --- they're underwriting the Google IPO. Who do you think Morgan Stanley and CSFB are?
What's more, it's not obvious to everybody that Google's approach is necessarily motivated by helping individual investors (like the average Slashdot reader). For example, take Henry Blodget's recent column on Salon:
Recall that Google is also not the first dot-com darling to choose a dutch auction, either. Other notables include the stunningly successful Salon (heh) and --- wait for it --- Andover.net, back in 1999.A Dutch Auction doesn't necessarily kill the initial pop in a stock offering (there's an argument that it'll increase the value of Google's shares in the early days), and it doesn't cut the underwriters out of the action. They just keep the money they'd be doling out to cronies.
Finally, "do-no-evil" pledge or not, there are objective criticisms of the way Google is handling this IPO, and they aren't coming from Wall Street.
Personally, I wouldn't know the first thing about the true motivations behind Google's actions, but my totally uninformed take is that Google is doing an auction IPO just to be iconoclastic.
The author of the article missed a key point: the Greenshoe - where the underwriters get options to buy shares directly from the company at the IPO "offering price", which is set by the underwriters. The stated reason for this is that in case the underwriters underestimate the demand for the shares they will be able to buy more shares from the company to satisfy this demand.
But the Greenshoe has become hugely abused by investment bankers by overselling IPO's by 2-10 times the number of shares being offered even though they know the shares available from the greenshoe options will only cover a very small percentage of this. The investment bankers figured out that if they vastly underpriced the IPO "offering price" that those options instantly become hugely profitable. By doing this, the money that investment bankers make on their greenshoe options on HOT IPOs can be even bigger than the embarrassingly high underwriting commissions. But don't expect the bankers to tell you this because they are not required to disclose greenshoe profits.
A Dutch Auction does not leave a place for greenshoe options. If demand is higher at a given price than the number of shares the company wants to sell then the IPO price is increased until this lower priced demand is choked off. So if Dutch auctions take off and become the new standard for IPO's then investment bankers can kiss greenshoe profits goodbye forever.
Its not just loosing the ability to bribe CEO's with allocations of IPO shares that is at stake here, but also a large portion of the investment banker's profit incentive for bribing CEO's to get IPO business.
"Lycos"
Search engines are generally not money makers.
Search engines that are popular because they are fast -- (and fast because they don't serve graphics) are even worse money makers.
I'll buy at $12
------ The best brain training is now totally free : )
The problem with economics? Lack of accurate prediction. One thing we know of science for sure is that it makes accurate predictions - and that hypotheses that do not make accurate predictions are discarded.
Until economists are able to make the sort of startlingly accurate predictions that biologists, chemists and physicists make - they shouldn't describe themselves as scientists. The other thing to remember is that most physicists, chemists and other scientists have a huge body of knowledge and theory that they do agree on - it is the advanced stuff where there is disagreement. What you believe in economics tends to be more influenced by your personal politics and the school you went to.
Crony Capitalism, as it is often termed, has at one time or another, and with varying degrees of severity been part of all modern free market economies. It is natural for those in power to limit access to finance and wherever possible to restrict membership in the elite group which receives generous discounts on hot IPO stock options. The way to break the power of the investor elites is by doing precisely what Google is doing, using the power of the free market to directly open up the bidding to the entire world pool of investors and capital. The elites hate competition because it makes them work harder for less profit but the rest of us, including the small investors, are all better off for it. This is an excellent example of the power of free markets at work.
Everyone keeps comparing this to a regular IPO. As far as I understand, its not. This whole dutch auction things changes everything. The idea is that the stock starts at a ridiculously high price and they keep lowering it until people buy. Then when people stop buying, they lower it some more. They keep doing this until all shares are sold. And whatever the last person pays is what everyone pays including the very first bidder. So if you start paying $135 for a share, its really just a short term initial risk your taking because at the end of the day you may only be paying $5 bucks for it. Its kinda like saying, "I have faith in this company so I'll pay this much for a share right now" knowing full well that you'll pay less, its just you dont know how much less and thats where the risk is.Personally, I think the system is ingenious and I hope it catches on. This is all of course assuming that I understand correctly how it works.
Regards,
Steve
I looked around a little bit, but the only place that I could RTFA was on MS's MoneyCentral site.
Since MS is getting busy with the "Search Engine" market to compete against Google (and others), doesn't this seem a little odd that the only place you can find google-bashing is on their #1 competitor's site?
I'm not trying to troll or bash either company, but this looks like it's a little one-sided from the MS perspective...
--- "To ignore race and sex is racist and sexist!" -- Jesse Jackson
Yeah, I always thought that movie was a bit misdirected. I mean, it appealed to many of my geek sensibilities, but at the same time it was a bit ridiculous. Like when he claims that the old guys have tried to recite every combination of a 256 digit number... yeah, right!
Anyways...
There's actually a gnostic/mystic tradition to that bit, but the way I heard it, it was tibetan monks that had to say "all the names of God", or some such. Hmmmm, now I'm wondering if it wasn't a short story I read somewhere.
Anyway, the idea seems a little less far fetched when you consider 1) They'd been working on it for three or four thousand years and 2) That's why they needed the hacker character, because they were tired of waiting! =)
It's not offtopic, dumbass. It's orthogonal.
if you think this was negative, you should have seen some of my other comments yesterday ... but ...
...". you're much tougher here than i.
...
1. as far as i can see, i was the first to reply directly to your message.
2. your message says "i think this equates to fraud
now for a constructive criticism: why don't you apply your analysis to the ability of a company to do a secondary offering or to create options out of thin air and distribute them to employees and analyze the scent of fraud there. these forms of dilution will generally affect the actual value of shares, and owners don't generally have the time to learn about it beforehand and reject or get out of their positions without a loss (unless its a secondary and the underwriter props up the share price, which i've seen often).
the employee options is more insidious to stockholders, although the many folks on this board who are recipients of such options will of course speak out of self-interest
Jack Daniel's....:)
"City hall" in German is "Rathaus" Kinda explains a few things......
If this is what you had in mind, then, yes, economic and quantum mechanics are not sciences, and we need a different name to describe them. But only the terminology changes. It is like deciding whether tomatoes are fruit or vegetable. Whichever way you decide has no real bearing on tomatoes. They are still exactally the same as before. Tomatoes.
However, when people say 'X is not a science' the implication is that the conclusions of X are not as true, or as important as those that are dubed science, and can be disregarded or doubted. While there are no doubt many fields where this is true, this does not apply to economics, or quantum mechanics.
Last point, it has been shown that all physical phenomenon (except gravity so far) are merely special cases of quantum mechanics. This would mean that astronomy, biology, chemistry, and most physics are not science either, as there are all quantum mechanical at their core. Is there any science left?
Laws are horrible moral guides, moral guides make even worse laws.
That's not really a good way too look at it. While % change is important, you cannot rule out the value of price, as a security can be "expensive" at some levels and "cheap" at others. There are many metrics used to track stocks. To list securities by their % change would be as confusing as listing fruit prices in the super market in terms of % change. A smart investor looks at everything. Also, dont take for grated that companies will split. Many dont, some do like clockwork. And if you think intelligent investors dont focus a whole lot on market cap already, then you really are out of the loop.