Google's Unconventional IPO: A Wild Gamble or a Smart Move?

Strategic Insights -

Google's unprecedented auction method for its initial public offering (IPO) has sparked intense interest and speculation among investors, with many hoping to ride the wave of hype surrounding the company's potential stock value. For first-time investor Violet Trout, 54, the prospect of owning a piece of Google was too enticing to resist, despite her limited experience in the stock market. Meanwhile, seasoned entrepreneurs like Mark J. Pincus and Richard Abraham are betting on a lower initial share price, using complex strategies to maximize their returns.

Key Takeaways:

  • Google's IPO auction is open to a wide range of investors, including those with limited experience in the stock market, such as Violet Trout.
  • The auction's unprecedented nature has sparked widespread speculation about the potential stock value, with some investors hoping to buy low and sell high for a quick profit.
  • Seasoned entrepreneurs like Mark J. Pincus and Richard Abraham are employing complex strategies to maximize their returns, using methods like the "Mark Pincus bidding plan."
  • The company's founders, Sergey Brin and Larry Page, have touted their commitment to ethical business practices and a "don't be evil" motto, which has resonated with inexperienced investors like Trout.
  • Google's use of a modified Dutch auction has sparked debate about the potential pitfalls of the auction method, including the risk of overvaluing the company's shares.
  • Initial public offering set at 25.7 million shares with a price range of $108 to $135 per share.
  • Some investors, like Beulah Naude, have expressed concerns about the potential risks of investing in an overvalued company, citing a fixed income and limited ability to afford the higher end of the price range.
  • Others, like the Csabys, have decided to wait for the stock to begin trading on the Nasdaq before making investment decisions, citing concerns about the current market conditions and potential drops in share value.

Statistics:

  • 25.7 million shares of Google stock available for auction.
  • Price range: $108 to $135 per share.
  • Auction period: approximately one week, with bids closing on the highest level that ensures the sale of all shares.
  • 8 out of 26 respondents to an informal poll published on the Motley Fool said "no" to bidding on Google, while 17 said "too bad I can't short it."
  • Of 2,800 clients served by Raymond James Financial Services, only two asked about bidding on Google.
  • 20-digit auction registration number required for participation, with over a dozen brokerage houses approved to handle the deal.

Sources:

  • [The New York Times, October 1999, pg. C2]
  • [CurrentOfferings.com, a research Web site]
  • [The Motley Fool, a popular investment-advice Web site]
  • [Raymond James Financial Services]