re google ipo
i dunno what youj're seeing, but everything i read is talking down the ipo. for example, this from forbes, which is downright hostile:
IPO Outlook
Gagging On Google's IPO
Scott Reeves, 08.06.04, 6:00 AM ET
NEW YORK - Just as some people are famous for being famous, Google's planned IPO is said to be hot because, well, it's hot.
Don't believe it. Hold on to your money or buy Microsoft (nasdaq: MSFT - news - people ), a proven winner. Don't go gaga for Google.
Interest in the IPO is driven by something close to mob psychology. The Dutch auction method of allocating Google's shares is intended to eliminate the wild first-day gains seen during the 1990s tech bubble. But keep in mind that the crazies are out, and Google's stock may climb as much as 40% in early trading because some people don't understand the Dutch auction and will gleefully pay for their ignorance. Selling is the only way to pocket the premium, but selling too quickly is a recipe for volatility.
If the shares don't take off in early trading, "winner's curse" may kick in as successful bidders conclude there is little demand for the stock above or equal to the initial public offering price. If this happens, some winning bidders may conclude that they overpaid for the stock and may seek to dump their shares to limit their losses should the price decline in the future. In that case, unsuccessful bidders with an ounce of market savvy will wait for the price to fall before jumping in. This could result in a significant decline in the value of the shares from the offer price.
"Google is something people use every day," says Tom Taulli, author of Investing in IPOs and co-founder of CurrentOfferings.com. "So, many people think it must be a good investment, right? Google has a small float subject to the impact of hedge funds and short-selling. The stock's performance will resemble an erratic EKG."
So why not launch Google's IPO the old-fashioned way? Price the shares to sell at, say, $20 to $25 each, and watch the fireworks. This is where California egalitarian claptrap kicks in, even in Silicon Valley, where entrepreneurs weaned on venture capital should know better.
The Dutch auction is intended to give individual investors a chance to get shares at a good price. Right. Google's shares are pegged at a mere $108 to $135 each, and only those who were dropped on their head at birth will plunk down that kind of cash for an IPO.
Google's the top search engine, but that's all it is. The company is experimenting with e-mail that may include ads pegged to keywords. That's certain to raise questions about privacy. It may tout photos, but Microsoft and Yahoo! (nasdaq: YHOO - news - people ) are already there. Despite Google's strong earnings, investors may soon ask, Where's the growth?
Keep in mind that Netscape was once a hot IPO, and the company no longer exists. It couldn't move beyond being a Wall Street darling and development bottlenecks allowed the competition to crush it. Google is growing rapidly and faces a new challenge--management, not technology.
Rival Yahoo! has done a better job diversifying with news, sports, personals, travel, jobs, online shopping and other whizzes and whirrs. Investors who want to include a search engine in their portfolio might consider it, lofty valuation and all.
Bill Gates presents himself as a super-nerd, but he's Alexander the Great looking for more empires to conquer. It's been a while since Microsoft crushed WordPerfect and pounded Novell (nasdaq: NOVL - news - people ). All that cash suggests the software giant is ready for fisticuffs, despite the challenge from Linux.
Yet Microsoft's stock recently fetched $28.29 per share, bouncing between $24.01 and $30 in the last 52 weeks. No doubt, the company is looking for something to drive the price--and that something may be search technology. Microsoft rules the desktop computer, and, assuming the antitrust dingbats in Washington aren't unusually stupid, it may be able to uses its strength to muscle into the search engine business. In the meantime, Microsoft offers something Google doesn't even contemplate: dividends.
Or take a look at Intel (nasdaq: INTC - news - people ). Its stock recently traded at $24.90 per share.
Google's planned 24.6 million share IPO includes about 10.5 million shares offered by current stockholders, including co-founders Larry Page and Sergy Brin. Why put your money in their pockets? It's a lot of jingle, too--Page plans to sell 964,830 shares, and Brin plans to unload 962,226.
The company's recent disclosure that it may have violated U.S., federal and state law by issuing about 23 million shares to consultants, as well as current and former employees, adds another layer of risk to the IPO. That's a huge number of shares--not the kind of thing the janitor finds stuffed behind a filing cabinet. The obvious question is: How can a good company be so inept?
Technological changes are swift and brutal on the Internet. There's no immediate apocalypse in the wings for Google, but Microsoft is circling.
The Dutch auction will screw up the dynamics of Google's IPO. Many individual investors don't understand how the auction works and know only that they want Google's shares. Those who survive may learn something.
Terrific company. Nutty deal. The shrewd investor will wish Google well but say, "Not with my money."
An Update From Last Week
On Wednesday, Nanosys withdrew its IPO due to "adverse market conditions." As I said in last week's column (see: "Nanosys: The Giant Dwarf"), the deal was generating a lot of buzz, but it wasn't necessarily a good investment. The deal underscored the IPO market's pioneering spirit, but as Nanosys found out, it's tough to be the leading edge of technology.
AI
