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Google's IPO Trading Defies Dutch Auction Logic?
TopShelf writes "Today's first-day trading gains for Google may not have just been the result of ambitious day-traders. This story from CBS Marketwatch alleges that Google deliberately set the $85 IPO price well below the true clearing price of their Dutch Auction, and issued fewer shares than expected, perhaps with the intent of limiting supply and assuring themselves a nice runup during the first trading day. In the story's informal survey, winning bidders only received 75% of the shares they should have."
Glad I'm not the only one who suspected this.
I think the strategy could actually backfire on Google - since decent short-term gains are now attainable, many bidders will cash out early (a scenario they were hoping to limit via the Dutch Auction process).
Just MHO, but it'll be very interesting to see where the stock heads in the coming weeks.
My its sad to see all the people switch sides on Google since they finally decided to become public.
Welcome to America, where it is popular to bash capitalism while you practice it. Its odd that so many people equate success with "selling out", or see being profitable as evil. The irony is, no matter how great the technology of Google is, it would be irrelevent if they couldn't pay the bills with it. As long as Google doesn't get big headed, it will pass.
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105 was the bottom of the expected range, until the day before when the lowered the price by $20, and the number of shares by a few million.
So then it went up $15 the first day, instead of dropping $5.
So it's still funny business as usual. Had they not changed all the numbers the day before, it would have been completely different, and very likely would not have moved much.
- Adam L. Beberg - The Cosm Project - http://www.mithral.com/
Apart from anything else, Google has, as I understand it, been making money for a while now. And hey, they've been quasi-accountable to their 'angel investors' for a while too.
Not to mention, that the 'Google Guys', and the board, still retain absolute control over the company. At no time since they got big, has Google not been out there to make money. They aren't evil, but they aren't a charity either.. So it seems a bit premature to go all chicken little and run around crying 'Google is turning into Yahoo!'.
fortune -o
Actually, the shares they are selling are NON_VOTING shares, so the pressure is not as great as you think. They will still be able to take risks, which is how you get both cool and success.
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IANADT, but it seems that an upward movement was almost inevitable, given the pre-set condition that the price would be set such that fewer shares would be received than "won".
The stock seems to have stabilized at $100, $13 away from where it started. If producing a stable stock price close to the IPO price from was Google's intent, at least as far as today is concerned they suceeded.
I don't know what Google could have done to please people here. If they set the price too high they're overpriced and foolish. If they set the price too low they're "causing a pop" and greedy. At this point, I'm just going to shrug and get on with my life.
Seriously, wtf?
So a company made an IPO. Wow.
Not to sound like a troll, but people are clamoring about this and I just don't get why. I use google as much as the next person and they're a good company, but what does it have to do with the stock market?
Do people think this is a magic pot of money? Just because it's google doesn't mean it will constantly increase in value. Just because it's google doesn't even remotely guarantee that the stock will perform well. That's all at the hands of the traders.
So really now, what is the big deal all about?
There's lots of complaining from the established brokerages about how Google did it. They are churning the media on this one. Google pulled a fast one on the street and they don't like it. The way it was done would have meant brokers could pass out cheap shares to their buddies. Google's Ductch auction meant that the market got to bid a price. This "first day run up" can be purely ascribed to wild day trading. There's nothing Google could do about it. They were wise to get a good price beforehand.
Google's valuation is pretty rich :
CBS says it's 23 billion. General Motors is 23 billion. Is google worth GM? I don't think so. The current $100 price should shrink quite a bit as the the entusiasm wears off.
Google is sitting pretty for the moment, I hope their employees and early investors can pull a little bit out while the price is still high.
Screw Wall Street, they were denied insider's cut and kudos to Google for being patient and suceedding in doing it a different way.
19.8 million shares * $85 = 1.666 billion. Yep that's right: 666. What happened to 'Don't be evil'?
If it wasn't for the dutch auction, you know what would've happened: the stock price would've been set at $15-20, insiders and bankers would've bought at or below that range, and then when it popped at $100, they would pocket the difference.
With the auction the pop was smaller and the company got more cash.
I think they did all right.
You're going to hear a *lot* of noise about this from those bankers and wall street types that would've preferred the $15 to $100 pop. They will float all kinds of rumours about google just to make sure nobody else tries to price their IPOs more fairly in the future.
Follow the money, as usual...
It is very uncommon in an IPO to get even half of the bidded shares.
CBS marketwatch is just going along with the unhappy crokers / brokers that are not receiving their $1/share commissions because the Google guys decided to let you and I have a fair shot at investing in GOOG via a true public auction.
Wallstreet doesn't care if you make money. They only care if you continue to make MORE money each year than the previous year. This is why it's idiotic to take a company public. Once you do this, you move your company from a mission statement of "make a profit by making a killer product and satisfying customers" to "continually increase profits at all costs". And that, my friend, is how you end up with Enron and Tyco.
In a private company, it's enough to pay the bills, pay your employees, have happy and loyal customers and make yourself a nice chunk of cash in the process. You're happy to pocket $5mil every year for yourself, but wallstreet wants $5m this year, $10m next, $15m the net and $50 the one after that, until the only way to continually see huge profit margins and increases is to resort to some shady business - or watch your company turn to shit and crumble (Sun Microsystems).
Defend our borders against whom? Who's gonna invade us?
The only country who would ever be even marginally likely to do so has a military so powerful that we could never defend against it regardless of what we spent.
Canada needs a military like a fish needs a bicycle.
www.kitchengeek.com -- Nosh for
There was an error this morning in which one of the brokerage houses let two trades go through early which resulted in the briefly reported $140 price. The NASDAQ announced that trading had not yet begun and it began trading at the opening price of $85 a little bit later in the morning. Since Yahoo's chart likely just grabs the data as it's seen and plots it, fixing this may be a manual thing. You can read about the error here.
Actually, the shares they are selling are NON_VOTING shares, so the pressure is not as great as you think.
Factually, you're completely wrong. But you're basically right.
The shares being sold are class A common stock, with one vote per share, just like the common stock of just about every other company. However, the founders and certain insiders are holding class B common stock, which has 10 votes per share. The net result is that the public shareholders have a very weak voice. In fact, if the Google insiders maintain a united front, the public shareholders are massively outvoted. That was arranged on purpose, because people at Google were concerned about the effect going public might have on them.
They thought about this danger, and took steps to prevent it, at least until the holders of class B common shares either sell or die (in which case the B shares automatically convert to A shares, one-to-one, meaning that what was 10 votes becomes one vote).
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