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Google The Internet Businesses The Almighty Buck

Google's IPO Trading Defies Dutch Auction Logic? 349

Posted by CowboyNeal from the opening-day-hijinks dept.
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."
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Google's IPO Trading Defies Dutch Auction Logic? More

Google's IPO Trading Defies Dutch Auction Logic?

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  • A good idea? (Score:5, Interesting)

    by Anonymous Coward on Thursday August 19, 2004 @10:09PM (#10019399)
    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.

    • Re:A good idea? (Score:5, Interesting)

      by steve_ellis ( 586756 ) on Thursday August 19, 2004 @10:28PM (#10019497) Homepage
      I believe the idea of the Dutch auction process is to allow regular people to participate in the IPO. Normally on an IPO this hot, only 'high-rollers' associated with the offering brokers would get a shot at buying at the IPO price.

      Also, with this technique, Google gets a _lot_ more money--to their credit (well, actually it is also in their best interest), they did leave enough money on the table so that people would want to bid for the auction.

    • Well for now (Score:5, Insightful)

      by Anonymous Coward on Thursday August 19, 2004 @10:31PM (#10019509)
      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.
      • The stock ended the day at $100. It has NO WAY "stabilized" at $100 until it stays there for AT LEAST a week.

        It lost 4% in the last 5 hours of trading. That is not "stable" by ANYONE'S standards.

        Stewey
    • from wail street weasels restricting IPO grants to buddies, setting the price at a high point from which they get rich, and the schlubs who didn't get initial grants of IPO stock when were sold side-by-side with the public offerings to provide a bonus on top of wonderful gifts from finance-world heaven get the shaft.

      this way, everybody with a winning bid got stock, and had a chance to quick turn it around for a hot gain if they so desired.

      backfire, hell, they did good and didn't lose hundreds of millions

    • Re:A good idea? (Score:3, Interesting)

      by hazem ( 472289 )
      many bidders will cash out early (a scenario they were hoping to limit via the Dutch Auction process)

      I'm just beginning to study these things. So, given that they're just making their IPO, does it really matter if there are big fluxuations in their share price now?

      I mean, suppose there are a bunch of people who try to reap the profits by selling their shares. It's not as if Google has to buy them back, so they're not out any money.

      Now sure, this dumping will push the price down, and therefore the book

      • Re:A good idea? (Score:3, Insightful)

        by JamesKPolk ( 13313 )
        You're not really missing much of importance, but there is one thing to consider: You're thinking in the long run. Many, many people on Wall Street are very short sighted.
        • You're thinking in the long run.

          I know it's off-topic, but THANK YOU! In my mind, that was a great compliment!

          I try all the time to get the people at work to think long term about what they are doing. If we kludge the network together, or keep doing quick fixes, we'll be forever doing that.
    • Yes. They showed their naivete by some of their actions and probably should have had someone guiding them through the process to prevent them from cutting their throats to the point of cancelling an IPO completely.


      That said, one of the things which really gripes a lot of people in the business is "flipping": "buy low, sell high", but to the point of insanity - a few points one way or the other and flip the other way.

      The reason it's frowned upon is because it causes the stock to bounce; not just pump a

  • Google ad (Score:4, Funny)

    by sparcnut ( 775902 ) on Thursday August 19, 2004 @10:09PM (#10019407)
    I find it ironic that the Google context-sensitive ad for this article is about making your website a "revenue generator"...

  • Poor Google (Score:3, Insightful)

    by MrMojado ( 786565 ) on Thursday August 19, 2004 @10:09PM (#10019408)
    My its sad to see all the people switch sides on Google since they finally decided to become public.

    • Re:Poor Google (Score:5, Insightful)

      by Pigbot ( 797016 ) on Thursday August 19, 2004 @10:14PM (#10019428)
      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.

      • Re:Poor Google (Score:5, Interesting)

        by aldousd666 ( 640240 ) on Thursday August 19, 2004 @10:24PM (#10019479) Journal
        This is true. We demand the benefits of an open market, and yet we complain when taxes are high enough to support the social programs that other countries have. Someday people will realize that we can't have our cake and eat it too. I personally think the risk of going broke and living without healthcare is worth the ability to make yourself rich by your own accopmplishments and ambition.
        • Even in highly taxed Canada you can make yourself rich by your own accomplishments and ambition. If you are bright enough to build a successful business you'll be intelligent enough to find a way to reduce your taxes and find some offshore evasions. Ask our Prime minister he know some stuff about that! ;)

          • Re:Poor Google (Score:4, Funny)

            by flacco ( 324089 ) on Thursday August 19, 2004 @11:29PM (#10019751)
            Survival kit contents check. In them you'll find: one .45 caliber automatic; two boxes of ammunition; four days concentrated emergency rations; one drug issue containing: antibiotics, morphine, vitamin pills, pep pills, sleeping pills, tranquilizer pills; one miniature combination Russian phrase book and bible; one hundred dollars in rubles; one hundred dollars in gold; nine packs of chewing gum; one issue of prophylactics; three lipsticks; three pair a nylon stockings. Shoot, a fellah could have a pretty good weekend in Vegas with all that stuff.

        • Re:Poor Google (Score:2, Interesting)

          by king-manic ( 409855 )
          This is true. We demand the benefits of an open market, and yet we complain when taxes are high enough to support the social programs that other countries have. Someday people will realize that we can't have our cake and eat it too. I personally think the risk of going broke and living without healthcare is worth the ability to make yourself rich by your own accopmplishments and ambition.

          Or you can live in Canada, and still prosper or sink by your own devices. But never be left without healthcare and soem
          • Healthcare?!? And you have to wait _HOW_ long for an appointment to see anything being a GP?
            • Several polls of canadians show that over 90% of them prefer their system to ours. THey live right next door; they speak the same language; they share the same culture; they are knowledgeable about our system and are knowledgeable about their system. If our system is so much better than theirs, then why do about 93% of Canadians prefer their system to the American system?
              • I happen to agree that the canadian system is better than the US system (I live in the US) but this is not typical. People in the US would tend to say their system is better and people in canada say theirs is. All this means is people in a democracy tend to be reletivly happy with the way their own governments do things.
              • Canadians have sort of the best of both worlds: they have socialized medicine at home, and are right next door to a capitalist medicine system if they want to use that. If socialized medicine was the only choice, and people couldn't go over the to US for treatment if they chose to, that might make at least some people less happy with the arrangement.

        • I personally think the risk of going broke and living without healthcare is worth the ability to make yourself rich by your own accopmplishments and ambition.

          You know, this quote intrigued me. So much so, in fact, that I went to your blog to check you out. I had to scroll down a good long bit to get at something that might help me understand you a little better, and to understand your quote a little better.

          And the silly outsourcing fable [blogspot.com] did just the trick! I won't get into that here, though.

      • Re:Poor Google (Score:3, Insightful)

        by Monkelectric ( 546685 )
        Its odd that so many people equate success with "selling out", or see being profitable as evil.

        To quote the great Brooklyn Funk Essentials (who isn't actually that great) "It's not selling out, it's buying in." (said with irony)

    • Well at last now they have plenty of capital to finish all of their damn beta offerings!

  • Who cares? (Score:4, Interesting)

    by Anonymous Coward on Thursday August 19, 2004 @10:09PM (#10019409)
    Google rocks, I hope they become really rich.

    • Re:Who cares? (Score:5, Insightful)

      by ZorinLynx ( 31751 ) on Thursday August 19, 2004 @10:11PM (#10019417) Homepage
      Of course, now Google will be accountable to shareholders, which means their primary goal will be profit, NOT providing a cool Internet search engine.

      Maybe it won't happen right away, but I see Google turning into a useless advertising poisoned portal someday which takes an hour to load on a DSL connection and doesn't work on anything but MSIE.

      -Zorin the Pessimist

      • Re:Who cares? (Score:5, Insightful)

        by kid-noodle ( 669957 ) <jono@nospaM.nanosheep.net> on Thursday August 19, 2004 @10:17PM (#10019440) Homepage
        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!'.

        • Re:Who cares? (Score:5, Insightful)

          by Anonymous Coward on Thursday August 19, 2004 @10:48PM (#10019575)
          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).

          • Ummm .... (Score:4, Informative)

            by gstoddart ( 321705 ) on Friday August 20, 2004 @09:28AM (#10022732) Homepage
            This is why it's idiotic to take a company public.


            That is largely affected by how many shares the company retains for itsself.

            If the founders still control a majority of the shares and don't plan on dispersing them, then all they've really done is allow others to join them on the magical carpet ride, and to raise a lot of money for financing operations.

            Wall Street doesn't actually get to say a damned thing about the operation of your business. They can expect things, and the analysts can say what they expect to see happen. Those expectations might affect buy and sell orders. [Which you correctly point out could cause a floundering company to do stupid things.]

            As a matter of fact, since no large institutional investors were really involved in this, there isn't some big megacorp who can now say "OK, time to start being evil like everyone else is -- begin the baby-grinding operations".

            If you had the scratch you could buy shares in Warren Buffet's company [berkshirehathaway.com]. You sure as hell can't tell him how to run his business because he retains a controlling share.

            Now, if they keep dispersing shares and a large controlling stake ends up in the hands of someone who is all about corporate greed, what you say could happen.

            But in general, going public to a degree isn't an automatic trip into corporate evils.

      • Re:Who cares? (Score:5, Insightful)

        by Pigbot ( 797016 ) on Thursday August 19, 2004 @10:18PM (#10019443)
        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.

        • Re:Who cares? (Score:5, Informative)

          by swillden ( 191260 ) * <shawn-ds@willden.org> on Friday August 20, 2004 @01:10AM (#10020160) Journal

          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).

      • I see Google turning into a useless advertising poisoned portal someday which takes an hour to load on a DSL connection and doesn't work on anything but MSIE.

        And by that time, Brin and Company will be long gone, and someone else will have perfected the ultimate search as a Ph.D. project, then spin it off to a privately held company, only to fall prey to the allure of money and take it public and walk away richer than Bill Gates while the company becomes a profit driven IPO...

      • Uh, you know, if you look (Score:2, Informative)

        by Anonymous Coward
        Only 8.5% of the company is now held by investors.

      • Re:Who cares? (Score:2, Insightful)

        by theycallmeB ( 606963 )
        And I suspect that if that does happen, I would use Google the same way I currently use Yahoo -- only under extreme protest.

        The only way Google can succeed is by remaining Google, everything else has already been tried and run into the ground.
      • People keep saying "Google is now accountable to shareholders".

        Well, I suppose in theory, but the vast majority of the company is still not publically traded, and it's not like the people in charge of the company don't own a controlling stake - so why would they care if they piss off all the shareholders? It's not like they can be fired.

        Most of these companies that get so concerned with quarter-to-quarter earnings are entirely different from Google, which is still, what, 80% privately owned?

        Fact of the

  • Of course, green is good karma (Score:5, Insightful)

    by otisg ( 92803 ) on Thursday August 19, 2004 @10:12PM (#10019419) Homepage Journal
    Of course they wanted to see green next to GOOG at the end of the day, and not red. Imagine where they would go in the days to come, had they ended in red! Google definitely plays their business, financial, and engineering games with human psychology in mind, and they play it so well, they are always taken as 'the good guys'.

    • This is stupid. (Score:2, Insightful)

      by tempshill ( 413165 )
      Movement of the stock price post-IPO gets Google nothing, <b>nothing</b>. Pricing the shares at 105 and ending with a $5 loss would have netted the company about $1.5 billion more and they obviously would have chosen this if they had the option. They just didn't, and had to price it at $85 due to lower priced demand than anticipated.

      The original poster was ignorant of how an IPO works with the claim that they netted a nice little gain after the IPO.

      • Really, the change in price after the IPO should net Google more in the long run since the number of shares was cut from the originally quoted amount. They always have the option to sell off the shares they originally intended to sell as the stock increased in value.

        Google is merely trading time for good will in the eyes of the public and in the eyes of the stock market. A stock that takes a plunge on IPO tends to create a good deal of negative perceptions regarding the company. Everyone and everyone was

      • Re:This is stupid. (Score:3, Insightful)

        by sql*kitten ( 1359 ) *
        Movement of the stock price post-IPO gets Google nothing

        Unless they plan to use their stock as an acquisition currency.

  • Almost right.... (Score:5, Insightful)

    by Duncan3 ( 10537 ) on Thursday August 19, 2004 @10:15PM (#10019434) Homepage
    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.

    • Re:Almost right.... (Score:3, Informative)

      by DeadSea ( 69598 ) *
      By setting expectations of the stock price so high they limited the number of bids they otherwise would have gotten. I'm sure that they lost out on thousands of people who would have bid in the $80-$110 range but thought "I'll never get it at that price."

      You know their Dutch auction was a total flop: The price was only about 2/3 what they wanted. That price was after cutting the number shares available way back. That means the 23 millionth bid was way way to low, or possibly they didn't have enough b

    • "The good guys" (Score:3, Insightful)

      by Luyseyal ( 3154 )
      Heh, they'll be the good guys till profits level off and the board forces out the founders, bringing in soulless bloodsucking corporate old boys to ramp up short-term profits to make the day traders happy.

      Sad, really,
      -l

  • Wacky (Score:5, Insightful)

    by GoofyBoy ( 44399 ) on Thursday August 19, 2004 @10:17PM (#10019441) Journal
    Another interesting point is that some venture capitalist firms pulled the stock they were going to sell. Did they know something the public doesn't?

    From http://www.nytimes.com/2004/08/18/technology/18CND -GOOGLE.html [nytimes.com]:
    Two of Google's big early investors, the storied Silicon Valley venture capital firms Kleiner Perkins Caufield & Byers and Sequoia Capital, decided to withdraw their combined 4.5 million shares from the auction early yesterday, betting they can get a better price at some point in the future.

    • Re:Wacky (Score:5, Insightful)

      by IamGarageGuy 2 ( 687655 ) on Thursday August 19, 2004 @10:23PM (#10019467) Journal
      Obviously the hype around this IPO is all that matters. When was the last time an IPO made the 6 O'clock news? Any serious investers would be scared as hell to touch this before it levels out a bit and all of the wannabe investors leave town after losing their cash.

  • Um. (Score:5, Insightful)

    by mcc ( 14761 ) <amcclure@purdue.edu> on Thursday August 19, 2004 @10:21PM (#10019459) Homepage
    The news article I saw said held the opinion Google lowered the number of shares in the offering in order to increase the initial offering price-- since the "dutch auction" system had the direct effect that the fewer shares involved in the auction, the higher the final price of the auction would be set. This made a bit more sense to me than this "limiting supply" theory.

    I think about the only thing to take away here is "no one fucking understands the stock market, and anyone who claims otherwise is selling something".

    • Re:Um. (Score:2, Insightful)

      by mr_gerbik ( 122036 )
      >> I think about the only thing to take away here is "no one fucking understands the stock market, and anyone who claims otherwise is selling something".

      Or is ignorant...
      • Or is ignorant...

        It's largly true, that the market is erratic and "unpredictable" because your guessing what the average buyer is doing, and their doing the same thing. So it's a whole room full of psychics trying to anticipate everyone elses move. General trends can be decerned but individual events are difficult. So it's nto ignorance. it's a Truism.

  • Actions in line with original statement (Score:5, Insightful)

    by Doc Scratchnsniff ( 681952 ) on Thursday August 19, 2004 @10:24PM (#10019477) Homepage
    This story seems to be a quest for the "Google scandal of the day" we've grown addicted to this month. The initial statement was that the shares would be priced so that winners would be able to buy 80% of the "won" shares. An "informal survey of five fund managers and small investors by CBS MarketWatch came up with an allocation of about 75 percent." That's very different from "75% of what they should have."

    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".

    • This story seems to be a quest for the "Google scandal of the day" we've grown addicted to this month.

      People not owned by large publishers can not win in press created by large publishers. Had the stock gone south, CBS would have printed more nonsense about Google's "arrogance."

      The poor coverage of and derogatory treatment of free software in the "mainstream" media has done much to discredit large publishers in my eyes. CBS, M$NBC, ABC, look more like moving tabloids than news. The only thing worse th

  • What is the big deal about this anyway? (Score:5, Insightful)

    by Anonymous Coward on Thursday August 19, 2004 @10:31PM (#10019516)
    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?
    • Actually, there is a direct correlation between competent management of a company and stock value. Google seems to be a competently managed company. I will let you draw your own conclusions.
    • 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?

      Several things:
      1) Many people like Google and hope they succeed. This will affect their stock prices, to some extent.
      2) Google is a famous company and there has been some contraversy about their going public. This means that their stock trade might be more chaotic and thus an opportunity for day traders.
      3) We're bored.
    • I was watching CNN and they did a little 4 minute joint on Google. The final point the narrator makes is that it questions Google's adjustment to the market. It questions if Google that has been used to doing things it's own way, that now it's responsible to investors, not just in-house management.

      I love Google too, but I can't help to get the sense that Google is a remnant of the dot-com bust but never busted... yet. I hope I'm wrong though...

  • Google did the right thing. (Score:5, Insightful)

    by Anonymous Coward on Thursday August 19, 2004 @10:38PM (#10019535)
    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.
    • Is Google worth GM is a damn good question. Though I sure feel more people use Google than any other product I can think of... assuming you consider the search engine a product. If Google charged 1 cent for every search, they'd be richer than M$ by now.

      • Comment removed based on user account deletion
        • Actually, I WOULD pay a cent per search. Google saves me a lot of time and money... instead of buying books and hiring professionals, or spending my time stumbling around libraries, I type a simple search and get (generally good) results fast.

          Not that I think Google will go this way, or that it would be a good business move, but I would honestly be willing to pay up about 10 cents per search... expecially if the search got even better (say, categorization of results). Above 10 cents, I'd probably wander aw

    • Google may be worth more... (Score:5, Interesting)

      by alexhmit01 ( 104757 ) on Thursday August 19, 2004 @11:24PM (#10019725)
      Google is sitting on a pile of cash and rapidly growing earnings...

      GM is sitting in a saturated market, getting smacked around by foreign competition and high oil prices, and has an unfunded pension liability in the billions...

      The REAL underfunding of the pension, if pension math wasn't SO rediculously warped as to make it look like it isn't a problem, GM is probably rightly valued at the price of Google... Remember, Assets = Liability + Owners (Shareholder's) Equity, OR, Shareholder Equity = Assets - Liabilities...

      Sure GM has a LOT of assets, but they have a LOT of liabilities, some of which are hidden from the balance sheet by the insanity of pension math... :)

      BTW: I think that Google and the Internet companies are RICHLY valued and priced for perfection... However, if they can MASSIVELY grow earnings over the next few years, they may grow into those valuations... i.e. grow earnings at 100% this year, and halve your P/E ratio, and the stock price is flat... Don't lose hype/momentum/confidence, and your P/E will shrink slower than that. By the time Google's P/E drops to "market averages" (when they aren't high-tech growth anymore, 15-30 years), they should have plenty of time to increase earnings to make up for it.

      Alex
    • That is a very deceptive comparison. "Hey, GM is a big, established company, of COURSE it should have a market cap higher than this young upstart."
      But what is the upside of GM? It is probably more closely priced to what it is worth.
      Newer companies are valued closer to what they hope to be worth in the future.

      Consider this: Yahoo is valued at $38 billion.
      Is Yahoo worth more NOW than GM?

      Note, I am not arguing either way on whether Google is currently priced accurately. Just that the comparison to GM is m

  • Sign of the devil (Score:5, Funny)

    by SlashdotMeNow ( 799901 ) on Thursday August 19, 2004 @10:38PM (#10019536)
    19.8 million shares * $85 = 1.666 billion. Yep that's right: 666. What happened to 'Don't be evil'?

  • seems okay to me (Score:5, Insightful)

    by Anonymous Coward on Thursday August 19, 2004 @10:42PM (#10019551)
    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...

  • GOOG for the masses (Score:5, Interesting)

    by trolman ( 648780 ) * on Thursday August 19, 2004 @10:44PM (#10019558) Journal
    In the story's informal survey, winning bidders only received 75% of the shares they should have."


    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.

  • They're probably cool with some runup (Score:2, Insightful)

    by Anonymous Coward
    They just didn't want first day balloons of 100% or more, which is what happened during the dot com era. The people lucky enough to buy at the offering price (generally the underwriting banks' best customers) made out like bandits, at the expense of the company and insiders selling their shares.

  • Conspiracy against Google? (Score:5, Interesting)

    by FunWithHeadlines ( 644929 ) on Thursday August 19, 2004 @10:57PM (#10019612) Homepage
    I read something a few weeks back that said Wall Street was annoyed that Google had gone to the Dutch auction approach. Reasoning being that Wall Street prefers the regular way whereby the IPO price is artificially lowered so that their best customers can be given the chance to make easy money. They felt if this took off that their easy money racket could be derailed. Wall Street hates that.

    So reading that I thought, I wonder if there will be a bunch of negative press about Google now? Since then, sure enough, nothing but negative press, rumors, bad mouthing. It's enough to make me wonder if the Wall Street crowd worked hard to make Google look bad so that other companies wouldn't do something similar. But I have no idea if this is accurate, or just coincidental. Anyone heard anything?

    • Re:Conspiracy against Google? (Score:3, Interesting)

      by Anonymous Coward
      I work at a large financial firm, now I'm not high on the corporate totem pole, but all the people I've spoken with regard this IPO as a history-making event, not neccessarily something to be looked down upon. I didn't hear any deriding of Google, in fact, most of the financial advisors were taking the mindset that they deserve some kudos for doing something different.
      • That's interesting, and I know there is a mindset on the Street that wants Google to do well to jumpstart the IPO market and lead to a rebound in the markets in the 4Q and beyond. But the article I read, in the New York Times I think, said that many were annoyed at the way Google was doing it. The big money managers, the ones who can gift their big customers.

        May be a 50-50 sort of thing: Short term, they are hoping for a good pop to help the market. Long term, they don't want to give up their good thin

    • Life is like a box of chocolates.... (Score:4, Insightful)

      by hughk ( 248126 ) on Friday August 20, 2004 @04:07AM (#10020683) Journal
      First, I work in an investment bank and have been a capital markets advisor (although never an investment advisor)

      The fact that Google were able to bypass so much of the existing IPO infrastructure upset the investment banks. Normally, the banks work on a principle that they can always unload the nut centres on the promise that the customer will get a couple of juicy soft centres next time round. There are many companies that would find an IPO much more difficult so the idea of having some 'sweeteners' around is always useful for them.

      If the best looking issuers bypass this mechanism then the banks will have less of a possibility for unloading other shares.

  • dutch, going to go up regardless (Score:3, Interesting)

    by mix_master_mike ( 540678 ) on Thursday August 19, 2004 @10:58PM (#10019621) Homepage
    With people selling their shares only for a premium in ANY ipo, it's a mathematical certainty that a runup on the first day is completely inevitable regardless of the process used to doll them out. This is because those who sell shares will not do so on the first day unless a nice premium is paid, and there were many investors out there that wanted a piece of the ipo. Google was successful in that the IPO did not product catastrophic price raises (50%+) that others have seen. Mike Sklut www.vafrous.com

  • lowballing ok, non-transparency bad (Score:3, Interesting)

    by davidwr ( 791652 ) on Thursday August 19, 2004 @11:01PM (#10019634) Homepage Journal
    Lowballing your IPO to ensure a 1st-day pop is OK. It provides a reward for those who bid, rather than "sit out" the IPO as many institutional investors did.

    NOT being up front about it is not.

    For example, they could've said (and I've simplified the #s) something like "we will sell 5 million shares and existing stakeholders up to 2 million. We will price our IPO at the bid of the 8 millionth share and allocate a 100% allocation to the bids for the top 5 million shares and a porportional allocation to the next 3 million shares."

    If stakeholders sell only 1 million shares then the lowest-3-million shares will receive only a 33% allocation.

    This would be nice and transparent, and would give an incentive to bid high.
    • Hate to tell ya this, but if you read up on this, they has announced that they MAY do this, it was stated as an option, and everybody ignored it. They couldn't do something that wasn't revealed, so they revealed choices and left it to the investors to decide. That they let the little man in when they knew that the mechanism beforhand was almost guaranteed to cause a pop is simply them trying to "do no evil", i.e. don't screw the little guys that want a piece of the action, but don't give all the money to

  • Financial n00bness (Score:2, Interesting)

    by Anonymous Coward
    Whoever wrote this crap is a financial n00b. Google issued as many shares as they felt is best for their interest. The initial price of 105-135 was a pure speculation, it does not mean that IPO could bring in that price. This is not a lost opportunity cost. And finally, regardless the method of the IPO the price within a few trading days will settle to a fair market value.
  • What is a "Dutch Auction"? Does it have anything to do with dutch oven [urbandictionary.com] or going dutch [urbandictionary.com]? Or does it refer to the stock market in the Netherlands? Oh nevermind... the link finally came up.
  • All the money shows are making it sound like the Dutch auction was some whacked out failure. I say it worked great. The big Wal Street Firms didn't get to skim off it, looting the individual investor out of gains and and the people who bid got a good price.

  • Shares Allocation (Score:4, Informative)

    by Dysert ( 774464 ) on Thursday August 19, 2004 @11:36PM (#10019783)
    In the Google prospectus, they state that they can set the ipo price such that successful bidders recieve approximately 80% of stock.
    https://www.ipo.google.com/data/prospectus.html

    In the event that the number of shares represented by successful bids exceeds the number of shares we and the selling stockholders are offering, the offered shares will need to be allocated across the successful bidder group. We, in consultation with our underwriters, expect to use one of two methods to do so--pro rata allocation or maximum share allocation. With either method, our objective is to set an initial public offering price where successful bidders receive at least 80% of the shares they successfully bid for in the auction. We do not intend to publicly disclose the allocation method that we ultimately employ. Once we choose an allocation method, we will not change it.
  • No one in either of the Google IPO stories today has commented on this, that I've seen.

    Why do the Yahoo charts show the stock as having been as high as $140 right off the hop, and dropping like a rock before settling around the $100 mark? Anyone with more insight as to the stock market or how Yahoo charts this able to comment?

    I can't be the only one on Slashdot who's noticed this...

    • It was a mistake (Score:5, Informative)

      by Anonymous Coward on Friday August 20, 2004 @12:40AM (#10020048)
      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 [nypost.com].

  • Check your mutual funds... (Score:4, Insightful)

    by LostCluster ( 625375 ) * on Friday August 20, 2004 @05:39AM (#10020977)
    If you own any mutual funds, you might want to look into what their behavior around the Google IPO was this week.

    The IPO shares had a pop of about $13 on day one, which clearly indicates that there were a lot of people who wanted in on GOOG stock but didn't get it out of the Dutch Auction process so they were willing to offer a premium to the first Dutch Auction winners who were willing to sell and bank an instant profit.

    I suspect that there were many "institutional investors" who boycotted the Dutch Auction simply because they didn't like it, as it takes the ability to bank instant profits away from them and instead gives it to the average investor. However, mutual fund managers represent a whole bunch of average investors at once... when they lose money, they're losing their customer's money.

    If any of your mutual funds turned out to have paid more than the IPO price for GOOG stock yesterday, sell the fund today. Your manager spent some of your money trying to make the Dutch Aution process look bad. If he was willing to pay $95 per share for GOOG in the afternoon, he should have been willing to bid $95 per share in the Dutch Auction, which would have resulted in the same shares for less money.

    The Dutch Auction is just a different way of doing an IPO, one that upsets the big boys because everybody gets to come out of the gate at the same time with no advantage for them anymore. This instant-pop seems to indicate that some people were waiting for GOOG to hit the NASDAQ system and not playing in the Dutch Auction, and if somebody was doing that in your name I don't think you want them controling your money any more.

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