Google IPO Swami 255
The Google IPO Swami writes: "I'm running an experiment and Slashdot readers would be good contributors. As you may know, Google recently announced that they will be using a unique dutch auction structure to price shares of their IPO. Instead of having the underwriters determine the opening price, the price will be set by the demand of investors that register to participate. I'm interested in how well the public can estimate this demand and the price of the shares to be offered. I'm giving away free shares in Google to find out. The person that comes closest to estimating the opening and closing price of the stock on the IPO date will win shares in the company."
The real object of the game... (Score:5, Informative)
3. Do you intend to place a bid for shares in the Google IPO? (Yes/No)
4. What price will you bid for Google shares? Enter 0 if you do not intend to bid. The value must be between 0 and 999, inclusive.
5. How many shares do you intend to bid for at this price?
Enter 0 if you do not intend to bid
There's the true motivation for this exercise. The person running this contest clearly states on his site that he's going to try to sell the results of the survey to people who want to have some way of peering into a crystal ball and determining what people would be willing to pay for Google before the dutch auction price is determined.
The day-trader investors who ususually love IPOs hate this Dutch Auction system because it gives them less room to try to buy up the early shares and then sell them the same day to people who wished they had gotten in on the IPO and are now willing to pay more to get their shares at market prices. (Smarter investors would place a limit order rather than a market order and just wait for the day-one spike to wear off and the price to be more in line with reality.)
11. Would you like to be contacted by someone to help you bid for shares in the Google IPO? You will receive one email if you say Yes. (Yes/No)
Talk about "highly targetted e-mail marketing list." That's sure to go to the highest bidder too...
This guy most certainly has a right to make a buck... we just should be smart enough consumers to realize that he's doing so by running this, and possibly withhold our information if we deem it too valuable to hand over.
Re:HOW MANY shares? (Score:5, Informative)
It's right there in the FAQ. 10 shares.
Re:Higher price (Score:5, Informative)
If too many people bid $500/share... then the cutoff price will turn out being something like $400/share, which will likely be artificially high considering the true value of Google.
You'll pay $400/share to get a ton of shares, but then only be able to sell them at their true value which the market will quickly realize is in the sub-$100s. What a way to lose 3/4 of your money!
That's the key of this Dutch Auction system. Instead of the lucky few with the right connections getting a pre-market chance to buy at a lower-than-fair-value price, this takes a stab at determining the fair value before the first shares are distributed. If too many people try to drive the IPO price upwards, everyone will find themselves holding shares that they'll only be able to sell at a loss.
The "I'm smarter-than-you, so I can make a quick buck off this..." gang is really better off sitting this one out.
Re:Higher price (Score:5, Informative)
Imagine that you did bid $60.00. Maybe other people will get stock and you won't, but if you believe that they are overpaying then from your point of view they are suckers, not winners. Remember that the goal of the game is not to get Google stock. It is to PROFIT from owning Google stock. If you bid high and get the stock and then watch it slide downward for years after you have lost, not won.
futures market (Score:2, Informative)
tradesports.com [tradesports.com] has a futures market on the relative price of the IPO. There is another futures market for the time of the IPO [technologyreview.com]
Re:The real object of the game... (Score:3, Informative)
Joe Daytrader can't get in on the IPO itself, but he can sit and be the buyer shortly after the bell when first one of the "lucky few" decides to sell their shares, antispating that there will be a lot of Jane Investors calling their brokers later in the day wanting that "hot stock" and willing to pay more.
It's not a certain play, but during IPO mania it worked far too many times for it to be healthy...
Re:euhm ... (Score:2, Informative)
Re:euhm ... (Score:5, Informative)
See, if Google released but a single share, that represented 50% of the company, I bet that single share would be measured in billions of dollars.
If they release 100 Trillion shares, my guess is, fractions of a penny will be the value.
Now it is a good idea to keep your stock price in the $5-$25 price point as it's then a pretty liquid stock, because most investors can afford lots of 100 (generally the smallest unit stocks are sold in by brokers, breaking a lot costs you extra). Institutional investors like pretty liquid stock prices, as they can get in and out of them pretty easily. I know that AT&T was considering doing stock splits to get their price back to about $10 not too long ago specifically to make it attractive to institutional investors.
If you are interested in long term investors only, you avoid stock splits, and keep the price going up. Look at Berkshire Hathaway for an example of this. There shares are worth about $90,000 for the "good ones", and about $6,000 for the "Baby Berks". They specifically never split, and never offer a dividend. It's an interesting model.
If you want to use a single metric to define if a company is worth something, at least use P/E. That's at least something kinda, sorta rational. It takes into account the number of shares, and generally there is an acceptable P/E for any given industry. The P/E of IBM and google could exactly the same, and have IBM's stock at $15, and Google's at $80. You deride that, but any serious investor would realize that the stock price has nothing to do with the value of the company. It's the stock price, and the number of shares that starts to tell you something intelligent. (I believe that number of shares, times the share price is the market capitalization).
Kirby
Perhaps Google ought to consider this... (Score:4, Informative)
Re:Who knows? (Score:1, Informative)
The unique identifier being the e-mail address - which is different for each submission (see grandparent). OK, if you want to argue that *.name@spamgourmet.com will be filtered how about just using something1,2,3...@your own domain and setting everything to forward to a mailbox until the win (surely more than one entry per domain is allowed).
employees are locked out for a period of time (Score:1, Informative)
What this system will do is ensure that Google's stock never has an up day for the forseeable future. It'll come out at $X and will fall steadily.
Also, first day trading should be relatively light, as each share won't trade hands 20 times on the first day.
google is really smart! (Score:5, Informative)
That's bad for the company in many ways. The problem with that for the company is that there is now unrealistic valuations for their stock...what I've been calling the "beanie baby" effect. Much like the toy fads that sweep the nation with obscene prices for stupid $5 toys, IPO's have the same trouble. The initial price that the shares sell at is all that the company gets ....Right now there are no "stockholders" to please....it's all about what the company needs/wants to be successful! This doesn't affect those VCs and angel investors wanting to leave...they already got their X% of company shares immediately available to sell off...This doesn't really hurt them.
What typically happens is that the "old boys" on wall street undervalue your company shares when they post them, then of course overvalue your shares to all the clients! It's actually the ultimate in "legal" inside trading. What they're trying to do is sell their shares for as close to "market value" as possible. That means the company gets the most money for selling itself and also gets a stable investor base instead of being victim to an immediate "downturn" from a larger company [say MS] that might use it's buying power to ruin them. They are also trying to get investors that want to be part of google, not just those looking for a quick buck.
In all it's a smart strategy because they are using the stock market like it was originally intended...for a company to gain capital!
Re:The un-PC point of view in re: Google IPO (Score:3, Informative)
http://www.webcpa.com/AccountingToday/index.cfm/t
WHO IS of googleiposwami.com (Score:3, Informative)
WHO IS of googleiposwami.com
Registrant:
Tim Ogilvie
463 Mass Ave
Apt 4
Boston, Massachusetts 02118
United States
Registered through: GoDaddy.com
Domain Name: GOOGLEIPOSWAMI.COM
Created on: 29-Apr-04
Expires on: 29-Apr-06
Last Updated on: 29-Apr-04
Administrative Contact:
Ogilvie, Tim info@googleiposwami.com
463 Mass Ave
Apt 4
Boston, Massachusetts 02118
United States
9176866816 Fax --
Technical Contact:
Ogilvie, Tim info@googleiposwami.com
463 Mass Ave
Apt 4
Boston, Massachusetts 02118
United States
9176866816 Fax --
Domain servers in listed order:
WSC1.JOMAX.NET
WSC2.JOMAX.NET
Re:Google = genius (Score:3, Informative)
Google's idea is to arrange for the stock to start at the market valuation, such that it will probably stay flat after the IPO. Since the system is engineered to prevent a bubble, it discourages speculation.
The point is really to become public with the minimum of volitility. They have to follow most of the rules for a public company anyway, so they might as well actually be publically traded, if for no other reason than to let their major stockholders diversify.
Re:Who knows? (Score:3, Informative)
http://www.blogmaverick.com/
for a real-world view of the market. He says it better than I could. Scroll down to the "Why do people fall in love with stocks" entry. Here's the direct link:
http://www.blogmaverick.com/entry/9817136470302
Enjoy and learn!
Re:Who knows? (Score:3, Informative)