AT&T Tech Support 360
August 19, 2004 3:35 PM PDT
Google gets to Wall Street--and lives
- Related Stories
-
Google shares rise in debut
August 19, 2004 -
In maturing market, how can Google grow?
August 19, 2004 -
Google to go for $85 per share
August 18, 2004 -
Google slashes IPO price
August 18, 2004 -
SEC opens new inquiry into issued Google stock
August 16, 2004 -
Google revealed in Playboy interview?
August 12, 2004 -
Google files for unusual $2.7 billion IPO
April 29, 2004
Sinatra would have been proud.
In the end, Google was able to launch its offering, despite the informal inquiry the U.S. Securities and Exchange Commission conducted into the company's stock options, the high-profile article in Playboy magazine, a shrinking deal size and IPO price and investor anger over two classes of stock and a lack of guidance on future financial performance.
 | ||||
|
| | ||
|
Special coverage Google's quest for gold  The long-awaited IPO begins trading Thursday at $85 per share. |
| ||
|
|
||||
|
|
||||
Despite those handicaps, Google and selling shareholders raised $1.66 billion--making it among the largest IPOs in history--and the stock climbed 18 percent in the debut to close slightly above $100.
"The news is: They got the deal done. And it's definitely successful. Any time a stock trades up from the offering on the day of the IPO, by my measure, it's a success," said Bruce Lupatkin, a general partner at money management firm Hangar Four Partners and former research director at boutique investment bank Hambrecht & Quist, which was later acquired by Chase Manhattan.
"So, if I wear my investment-banking hat, it was perfectly executed at the end, despite the other wiggles and waggles," he said. "If I wear my investor's hat, time will tell if it was successful."
During the pre-Internet bubble years of the late 1990s, traditional IPOs were priced to accommodate the potential of a 10 percent to 15 percent increase in price, once the IPO was launched and the shares started to trade, Lupatkin noted.
Google's IPO bucked tradition on Wall Street, and some of the negative sentiment surfacing about the company could have been engineered by institutional and investment bankers, some investors said. Institutional investors would want to speak negatively about a stock to push it lower before offering--to get a "pop," one fund manager said. It's also in investment bankers' interest to ensure that a Dutch auction-style IPO fails, because it cuts into their livelihood. Google's auction, for example, reduced fees to the investment banks by half.
Yet even though investors beamed over Google's IPO, auctions won't necessarily remold Wall Street.
"This isn't a conclusive case, where they would have been better off going the traditional route," said Connor Brown, associate portfolio manager at Thornburg Investment Management. "But I don't think managers of businesses looking to go public will be clamoring to do a Dutch auction process, either."
One institutional investor, who requested anonymity, noted that the stock rose because Google veered from a straight Dutch auction IPO to a modified version, in which qualified, successful bidders received only 75 percent of their requested shares.
The pro rata percentage allocation method was one of two models from which the company said it would select, if it did not use a pure Dutch auction, in which investors receive virtually all their requested shares, should they meet the clearing price. This disclosure was in the company's prospectus, which noted that investors would not be informed of which method the company ultimately decided to use.
But this institutional investor and others said they got 75 percent of their requested shares, signaling that the pro rata percentage method was used.
"We got shares, the shares went up, we're happy," the fund manager said.
But it wasn't exactly a Dutch auction, he added. Had it been, Google's shares would have traded flatly after their opening.
Brown, who manages Thornburg's Core Growth Fund, said his firm submitted five different bids for share allotments and was granted roughly 75 percent of two share groups it bid for a value of more than $85.
"We were pleasantly surprised. The investors benefited through this IPO process, even though there was negative sentiment. A lot of that culminated in what the deal was: a fair-market price."
But, he added, "Looking back, Google's management and early investors probably think it's less of a success."
See more CNET content tagged:
IPO,
investor,
auction,
Wall Street,
Google Inc.
Folks should not put much confidence in this one day pop in the stock price.
Wall Street will short the stock, they know when more insiders flood the market with stock that they were not able to unload in the IPO that the stock will tank out.
In addition to that Google employees will have stock to sell in a few weeks.
Google may not even survive down the road as spyware and M$ and Yahoo coming after them.
http://www.webcenter.squarespace.com/will-google-be-able-to-survive/
Most investors can not wait to sell the stock, don't get left holding the bag folks, just wait for a better time to buy........