Google IPO Swami

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."

Who knows?

[LostCluster]

One thing that this data will almost certainly show is that data entered today will we totally wild guesses and be totally disconnected from the real factors that determine the IPO price.

Macro-economic factors such as interest rates, price of oil, unemployment, and who the US President will be on the date of the IPO are still unknown. Hey, even the date of the IPO is still an unknown!

Bookmark the site and revisit it as Google gets further along the road to IPO. That's the only way to win at this game unless you're an extremely good guesser.

marketing scam?

[bigfatslob]

Does this seem like a pre-IPO buzz-generator to anyone -else-?

Maybe I'm too cynical.

Mike Hawk's guess

[Mike Hawk]

I guess the price will be somewhere near $250 per share on the day of the IPO and down around $1.94 about 4 years later. [yahoo.com] Be careful when investing in those tech stocks, you can get seriously burned. But this is just a guess, IANACPA or investment advisor. YMMV, void where prohibited.

Google = genius

[Anonymous Coward]

Great, let the people decide the stock prices. That way I'm sure Google stock will start out way overpriced.. giving the employee shareholders a grab at an awful lot of dough. After all, everybody loves Google. People have a tendency to use their emotions instead of logic to make purchases. The question is, will Google make money to stay afloat?

Guaranteed skew up

[shoppa]

The method of awarding a fixed number of shares (ten) in this contest guarantees that it will skew upwards the price of the stock.

If you made the choice of betting on $1, you would get $10 worth of stock. If you made the choice of betting on $200, you'd get $2000 worth of stock.

Now obviously you don't want to bet too high because if you do then you won't be right at all. But you will tend to bet on the high end, rather than the low end.

P.S. Everything I know about Economics I learned from The Price Is Right.

Higher price

[bobthemuse]

I wonder if the initial price will end up higher than this system was designed to determine.

From my understanding, people bid on it at any price point. When they decide to create X shares, the top bidders will receive those shares, but will pay the price point of the lowest bidder. If this is true, what's to stop me from bidding $500/share to guarantee I get to take part in the IPO? Since I won't have to pay this price, and I probably won't increase the per-share price significantly, an individual doing this could easily be guaranteed as many shares as they like. What happens when a large number of people realize this and it artificially increases the price?

Is there something to prevent this? Is this a desired action (maybe from Google's perspective)? Or am I just completely missing something here....?

I think the real question is...

[chrispyman]

does this person really think that getting wild guesses from thousands of non-investor types will help him determine anything?

Re:WINNER!

[LostCluster]

opening: 23.65 closing: 46.13

That's highly unlikely. There shouldn't be very many people wishing they had gotten in on the IPO and willing to pay more the same day just by the nature of this Dutch auction scheme. The whole point of choosing this method is to lock out the rich people who want to quickly double their money on same day turn arounds...

Re:Abuse?

[danharan]

Why should he care? He's just trying to figure out what a large number of people are willing to pay for Google shares, so he can game the auction.

Re:Who knows?

[LostCluster]

What do those factors have to do with the price of a tech ipo?

Because Google's stock has to compete in the universe of all investments. In short, the value of a share of Google will be in part influced by the value of all other potential investments available.

Each macro force has very little direct impact on the Google price, but there's a whole lot of them out there, and they all add up...

You know, he's doing a bayesian survey

[mveloso]

I just realized - he's doing a bayesian average!

http://www.research.att.com/~volinsky/bma.html

There was a possibly apochryphal story about this. A plane went down in a large area, and they needed to find it. Nobody really knew what happened to it. The leader of the search team went and asked a bunch of pilots where they thought the plane was, after giving them the course, heading, speed, and whatever data was available.

Well, they took the answers, narrowed the search area, then found the plane pretty much where the consensus said it would be.

A bit of thought will give you the reason this might have worked...

Re:WINNER!

[SpinyNorman]

Yep - the dutch auction format ensures that anyone who wants to can buy at the IPO price, so they'd be nuts to pay more for it after the fact (no doubt some people will do it regardless, but then they're doubly stupid for a) paying more than they need, and b) paying a price determined only by others like themselves!).

I'd expect a close pretty close (+/-) to the open.

Re:Guaranteed skew up

[kookbox]

You think the fixed number of shares being awarded in this look-like-a-scam-walks-like-a-scam contest will raise the price of the stock in the real-life Dutch auction? That's asinine.

Like I learned from Echelon, the map is not the territory.

Re:Google = genius

[RedWizzard]

The question is, will Google make money to stay afloat?

Google make plenty of money now. They made about $100M profit last year on revenue of nearly $1B. There is no reason to expect that to drop after the IPO. The real question is will Google's profits match the expectations generated by their share price?

Re:You know, he's doing a bayesian survey

[cheese_wallet]

"First of all, most people who enter the contest won't be experts like the pilots of your example."

experts don't determine prices in the stock market. The irrational public does.

Re:You know, he's doing a bayesian survey

[ergo98]

experts don't determine prices in the stock market. The irrational public does.

I have absolutely no numbers to back this up (and I'm too lazy to look), but I highly suspect that institutional and fund investors outnumber low-skill private investors on daily volume by a ratio of at least 100:1. It seems that for every Joe Average flipping a couple of shares in a couple of companies, there are hundreds of massive institution investors and fund managers flipping billions of shares.

I am, of course, talking about real companies with a real market, and not penny stock where only the low-skill investor is involved.

Bluff

[$exyNerdie]

I'm giving away free shares in Google to find out

He is so sure he will be able to afford to buy them !!

Re:The un-PC point of view in re: Google IPO

[Jah-Wren Ryel]

The only people who are against google's method of pricing, and selling, their IPO are those who benefitted from the old (ok, still current), hideously corrupt system. With google's approach (and a couple of other companies that did the OpenIPO thing back during the bubble) the favoritism and "old boy's club" method of handing out IPO shares to people who would "flip" them the same day for huge gains with little to no risk is eliminated.

Like most things in this world, I'm sure that this approach is not completely equalitarian but it is sure a damn sight better than the current scum-bags-r-us method endorsed by all the big players (aka thieves).

Not worth the hassle

[The Big Ugly]

Google's share price is garunteed to be overvalued. With all the hype surrounding its IPO the price will quickly skyrocket. Any seasoned investor knows that this is one stock to stay away from until things even out. Sure, they is always that chance for a quick profit for day traders. However, the likes of /. readers likely can't come up with or are willing to contribute enough cash to purchase enough shares to make it worth paying the capital gains. My reccomendation, put your money somewhere else. Invest wisely and with a longterm mindset, not because of the hype surround our favorite search engine. But what do I know? I'm just trying to get my brokerage license...

Re:Guaranteed skew up

[Anonymous Coward]

That's not what he said, idiot. the reward for winning the guessing contest is a monotonically increasing function of the actual price. For two prices x and x+.01, if I don't think x is more likely to occur than x+.01, then I should choose x+.01 as my guess, because the reward is greater.