Google Chooses An Underwriter For Upcoming IPO

PenguinSix writes "Bloomberg and a bunch of others are reporting that Google has hired Morgan Stanley and Goldman Sachs Group Inc. to arrange its initial public offering. This follows literally years of rumors and stories about a Google IPO. About a third of Mountain View, California-based Google may be sold in the IPO, giving the company a market value of about $12 billion, the bankers said." Google has become so invaluable to many people (like me) that they could probably raise just as much money with a blackmail scheme.

Blackmail.. maybe worse...

..they could probably raise just as much money with a blackmail scheme.

I was thinking along the lines of:

Dearest Sir or Madam,
Our names are Sergey Brin and Larry Page. We created
Google. This letter may come as a suprise to you
being as we have never met. A mutual friend, however,
suggested we contact you. There is an impending IPO
which will make our firm worth 12 BILLION U.S. DOLLARS
($12,000,000,000). To release this money, we ask that
you join us in a business partnership....

This is so 5 years ago

I'd buy that for a dollar!

The problem is

Unfortunately once they do this the companies worth will be based on its stock price instead of vice versa. And its stock price will be based on public opinion instead of tangible assets and the like..

Thus, while the original owners will maintain the appearance of control, the value of the company will fall into the realm of public opinion. As a result, in order to maintain company health it becomes necessary to start bullshitting (considering public opinion is based heavily on marketing)...

Et tu Google.

Now all we have to do...

Is figure out a way us regular mortals to get in on the IPO. :D

Be Careful: Use Buy Limit Orders

If you do buy Google on day 1, don't use a market order (especially in the first minutes). If the IPO becomes a feeding frenzy, you could easily end up paying 2 or 3 times what you expected (and yes, your broker WILL hold you to that price, no matter how bad it is). Instead, use a buy limit order [investorwords.com] to ensure that you pay no more than your target price for the stock. With a limit order it is possible that you will get no shares (if the stock blows past your price). On the other hand, you are ensured that you won't get shares at some outrageous price.

Re:Be Careful: Use Buy Limit Orders

You never know... I put in a limit order for Akamai [yahoo.com]'s IPO at 100, and was excited when I saw it was at 114 until I realized my order never executed. So I cancelled it and stewed, and watched it keep going up the 1st day, only to jump in an hour later at $145. I saw it go up to maybe $345 and put in a stop loss order to sell at $245 on the way back down. (I'd have sold earlier but my wife insisted we not bail too early).

Obviously things have changed since 1999 (or whenever this happened). But while I agree with you completely that a limit order is good for ensuring your exposure is limited, people may want to place that limit pretty high, depending on how desperate they are to buy in. And anyone who is risk-averse should of course stay far away, or at least wait to see how the wind blows.

Re:Now all we have to do...

Regular mortals will be in on the IPO. Somebody has to pay for the fall.

IPO: It's Probably Overpriced

"IPO: It's Probably Overpriced"

Then again, if offered a chance to buy some, and assuming it's not being done by auction, sure, I'll take some. And I'll flip it the first day. Without shame. Bring it on!

Re:IPO: It's Probably Overpriced

Traditionally IPO shares are initially sold at a fixed price, which tends to be below the price it will sell for in the first few days on the open market. The insiders then have a tendency to allocate IPO shares to their buddies, or family, or the bank handling the IPO, or whoever. Therefore people with "connections" can (essentially) get free money by buying IPO shares and then selling them quickly. If you are lucky enough to have access to this free money, it's in your best interest to take it.

Since the Google IPO is being done differently, there's no opportunity for insiders or anyone else to buy shares below fair market value -- buying IPO shares during the auction gives you about the same price you'd get on the open market 5 minutes after the auction ends. Therefore, nobody gets "free money" as is usually the case in IPOs. This allows Google to raise money more efficiently which, incidentally, is the point of holding an auction in the first place.

I think I'll buy some

"On any given day there would be a line of 200 investment bankers that would kill their mothers to get the Google deal,"
said Reed Taussig, chief executive officer at Callidus Software Inc., a San Jose, California based company that plans to sell shares in an IPO.

I think I will be SELLING my mom to buy some stock :)

Re:I think I'll buy some

Is she cute?

Re:I think I'll buy some

I really wouldn't buy GOOGLE stock. Aren't their profits reported to be somewhere in the 200 million dollar a year range? A 12 Billion dollar IPO is designed to do one thing: allow those who issue themselves the stock before hand to become wealthy.

This is another netscape boys, and a sign that the powers that be have decided to cash out on google.

Re:say good bye

Google will cease to be of any use once they have to satisfy a bunch of share-holder's demands.


They are only selling 1/3 of the stock, which means they will be maintianing full control themselves. I think we have much more to worry about from all the people trying to spam googles page ranking system. And even then, they seem to be making some progress with that.

Jedidiah.

Re:say good bye

> Google will cease to be of any use once they have to satisfy a bunch of share-holder's demands.

Only a third of the company is being sold. The principals who made Google what it is will retain a controlling interest.

And since they'll have enough money to buy anything they could ever want for the rest of their lives, up to and including sending a probe to Mars, so long as they retain a controlling interest, it's highly unlikely that any price will cause them to fuck up the wonderful thing that is Google.

The management of Google is responsible for seeing to the best interests of Google's shareholders. So long as that team holds 51% of the shares, the interests of Google's geeky management are the interests of the shareholders.

It's called shareholder democracy. You vote what you own. If the thousands of fund managers and people who buy stock in the market (who will, collectively, own 33% of the company) try to change the direction of Google against the wishes of the few dozen founders and managers (who own the remaining 66% of the company), the owners of the company can tell the fund managers to go straight to hell, and there ain't a damn thing the fund managers can do about it.

It's strongly rumored that Microsoft made a buyout offer to Google, and was turned down. The founders of Google aren't in it for the $12B because there's not much that Google does that requires $12B of paid-in capital. They're going IPO to make sure they, and those who helped build the company with them, get a good payday out of it. They built something wonderful, and they're now being rewarded for their efforts, and they're doing so without compromising a damn thing. To all three of those things, I say more power to 'em.

Google - "Pineapple-Upsidedown-Beans"

Buy Google Stock!

I'd prefer to see Google sell shares right over the internet through their website, maybe allow you to buy via an online payment service or other immediate means, such as credit card (with a validation period or something like that to prevent fraud.) I'd probably buy a few shares just 'cause I think they'd look cool in frames and would make great geek gifts! :-)

Google's geek following is strong, it would be a shame if a bunch of suits were owners. Good idea to keep it to only 1/3, but how long will that last?

GOO appears available as a stock ticker symbol.

Regarding blackmail, how so? Hasn't Google already been under the scope for fixing searches? Seems a dodgy thing to do once you're publicly traded, but fine as long as you're privately held.

I want it.

I'd buy some.

Even at the possible 7% mentioned, I'm sure it wouldn't take long to make a lot of money considering how ridiculously well-established google is in so many homes and businesses. One wonders how inflated they could wind up looking though. Could the google stigma raise their own market value above what it will be able to maintain? I guess this is why they're selling that 33% and not 49.

Damon,

Please stay private...

Is there anyone else here who is thinking that having such an invaluable internet tool now subject to the whims of public investors is not such a great thing? I would have rathered that Google stay private forever. That way they can make decisions based on what they think is best, not what will increase their stock price the most next quarter.

GMD

They're only selling 1/3

They're only selling a third of the company.

The current owners will have absolute control, and won't have to follow the whims of anyone else.

Re:They're only selling 1/3

They're only selling a third of the company.

The current owners will have absolute control, and won't have to follow the whims of anyone else.

That only works if the current owners always vote together as one entity. I doubt there is company that has ever put up more than 49% of their stock in an IPO. They always figure that they have 'absolute control'. But things never stay that way indefinitely.

Going public basically takes power out of the hands of employees and private investors, who probably care about the long-term health of a company, and puts it in the hands of the public (including market timers and mutual fund managers) who may not care what the hell happens to the stock price two quarters into the future.

GMD

Probably a solid investment

While it's been our experience that a lot of tech companies run IPOs for fast cash and then wind up dying shortly afterwards (think of the dot-com bubble bursting), Google is more like investing in your infrastructure; it's an invaluable tool used by a huge segment of the net-aware population, and thus is probably a very safe bet.

For contrast, you can ask yourself how badly those investments in Yahoo! turned out, years after they started themselves as a category-based alternative to the search engines available in the mid-90s.

Who knows..

For those who remember how crazy the IPO prices were back in the dot come era, do you think google's IPO will be as crazy as, lets say, RedHat? I can't even recall the last IPO I've heard about.

Re:This is going to get ugly.

That guy's site was unpopular, and now he is mad about it. Most of it can be attributed to his whiny attitude and immature approach to life. Google requires your site to gain popularity through channels other than itself.

Re:This is going to get ugly.

Oh please. Where've we seen *that* before ?

Before somebody else does it :
http://www.google-watch.org/
http://www.google -watch-watch.org/

The first is from an equally pissy person complaining about not being ranked where they would like to be, and the latter is somebody telling the first "tough shit".
The google-sucks.org person is in the same situation, and I must say that their "we have proof" (and subsequently not showing us that proof) hasn't instilled any level of trust in their story with me.

On blocking blogs - can you say "GoogleBomb", and even just the natural skewing of results thanks to blogs ? If I ran a search engine, I'd block them from the main results too. I would also check into a Blog-specific search. What's your problem with that ?

Spamvertising - Google added ads. So what ? Are they in-your-face ? Are they flash-based ? Are they obnoxius ? Are they difficult to recognize ? The answer to all is 'no', which you can't say for a whole lot of other search engines. Not to mention that I -have- actually clicked Google-served ads because the ads are dynamically loaded based on the referring page's content.

Manipulation of searches is blatant ? Well excuse me for liking that they manipulate search results to keep things, for the most part, fair. Maybe they have a hidden agenda - I wouldn't know. But if AssCorp decides to syndicate their store-content so that whenever I search for a particular product, I get 200 pages of different 'vendors' all serving up the exact same content and linking to eachother, then I 'm all for Google saying "Hey now - that shit looks a lot alike, maybe I'll bump down the ratings there some."

As for google toolbar 'spyware'. Whatever ?
This doesn't ship with some other application where you get tricked into it. You have to actually download it yourself. Then when you install, you get fully warned about what the Pagerank and the like options will do - send back information to Google. If you don't disagree with that, then either A. disable pagerank (and other features that cause information to be sent back) or B. don't install the Google toolbar.

As for what an IPO will do to Google - we honestly can't tell. Yes, it's easy to think that they'll cave in to demand from the public shares holders to allow rankings to be bought so that their shares go up. So what if that happens ? Is Google to blame for that - or the greedy public shares holders ruining things for the entire rest of the population ? Think about that for a minute.

Regardless.. there's other search engines. You don't like Google ? good for you - use a different one, and quit whining.

Dammit Google, I love you

Dear Google,

I have been seriously evaluating our relationship, and I've concluded you are not offering me what I need to be happy. I feel it is time for me to move on.

Yes, I know it's hard. We did have some good times together. Remember those times when you had "beta" in your name? Then came the time you bought and saved the Dejanews archive. I will always admire you for that. Then there was the time you added News search and Froogle. And all those times that you put those funny little cartoons in your name on holidays and on the birthdays of famous artists? Ahh, those were the days.

But those days are gone. Lately, you have been neglecting my needs as more and more results are being skewed by "link farming."

Then your eyes started to wander, and you started to pursue this illicit "shareholder love." You were wooed by this new lover that had a big wad of cash in his pocket.

Dear, no person can serve two masters: for either he will hate the one, and love the other, or else he will hold to the one, and despise the other. There are just too many search engines piled on the heap who whore out search results to the highest bidder. They think that they will never be caught, but eventually they are always found out.

You are just scaring me too much for me to take it anymore. I think it's best for both of us to find some therapy and move on.

Love,

eclectro

Law of nature

It is the law of nature that no one can keep a lead for ever. Bigger/better always comes along and looking at recent news coverage (it was posted on here too), Google might hasten the plans of going public before the next google shows up.....
But maybe I will still buy some if I had the money to spare...

They might as well...

According to silicon.com [silicon.com]:A private company must report its finances once it has more than 500 common shareholders - or stock-option holders - and $10m in assets, according to section XII(g) of the Securities and Exchange Act of 1934. That means a private company must file forms with the Securities and Exchange Commission (SEC) each quarter that disclose operating expenses, profits, partnerships, shareholders and many other details - a laborious process that can cost as much as $2m annually.

In other words, since the SEC is forcing them to behave like a publicly held company and publish quarterly reports, they might as well take the money and run -- much as we'd like them to remain privately held.

$12 billion?

Uhh what makes google worth $12 billion dollars?
Unless they have hundreds of millions in profit, you're better off buying a bond.
I don't get why it makes sense to buy google.

From the article

Considering a market cap of $12 billion
Net income $200 million = 1.7%
Net income $300 million = 2.5%

Not exceptional, there are companies with long histories with dividends above this.
You might get a better return from bonds.

Blackmail unnecessary

I don't know about you, but I would certainly pony up 10 bucks a month if Google switched to a subscription model. For me, it is the most useful site on the Web. I sure hope the new corporate overlords don't screw it up.

Who are they planning to buy?

Myself and a few co-workers were just talking about this. You see, Google's financials are excellent. By all accounts hey are making serious profits, all while doing R&D and maintaining infrastructure. So why the hassle of an IPO? We came up with two possibilities, one boring and one intriguing.

First explanation, their VCs have decided that now is the time to make some money and move on (markets looking up and such). Boring, but very likely.

Or... Google wants to buy somebody. They see an opportunity to do something big. We thought maybe they want to buy a big media company and become the defacto place to buy digital media. Everybody and their cousin seems to be starting online music stores. Maybe Google figures they can leverage their infrastructure and search market share to sell people music in the same place they search. But just another online music store is also boring. What if they bought MGM? Or a big slice of Vivendi? Music and movies.

Think about it.

Google must IPO

Google has remained private as long as possible. If their VCs were looking to cash out, they could have done it before the crash. And everyone has been asking them to IPO for the last 2 years to kickstart the stock market. It was smart of them to wait until the DJ was above 10,000, but probably unnecessary.

They probably are not worrying about buying somebody either.

The reason they are going public is because SEC rules force companies with a certain number of owners to go public. The companies have to file all the costly paperwork as if they were a public company, and they lose most of the advantages of staying private, such as not releasing all that information about their activities. There is little reason to stay private, and the extra cash from the IPO is handy for paying for all that paperwork.

The famous case of this happening was Microsoft. Too many employees were exchanging shares privately, and the SEC forced them to go public. They did really well, and you cannot blame their decline on being a public company since the prior management is still running things. OTOH, because MSFT is public, the shareholders can insist on new management, but they will probably wait until the stock goes under $10, and that will be too late to save the company, if it isn't already.

Google is being forced into going public. There is no need to look for extra motives from their investors and management.

Financials and dutch auction

It will be interesting to see the financials in the prospectus. Everybody "knows" that Google is profitable, but by how much? How long? What are the main sources of income?

Another thought, the smart thing to do would be a dutch auction, where every interested party posts blind bids in advance for lots of stock, with the highest bids being filled first, then next-highest, etc, until all the stock is sold. This means Google gets every penny they should and prevents investment bankers from underpricing the IPO to create a first-day "pop" in share value, where the IB and favored clients get to flip the stock for the difference between IPO price and pop price.

Google is slipping

I hope these problems I've seen recently are just temporary, but Google (or at least, google.ca) is having problems. A friend of mine noticed this too and in fact we were discussing this earlier. These can be show-stoppers, so they'd better iron it out before IPO:

• The search engine stalls and introduces delays longer than any I've experienced in the past
• There is more and more garbage in the index. In particular, sites that appear to have figured out the google algorithm and are using sites with similar content and mutual links to rank higher
• Sometimes, pages I know are there appear to be dropping into blackholes. As in, they disappear and there are no search results -- but a few hours later, there are thousands of results

How about a P2P search engine?

Imagine a distributed P2P search engine with no central control that can spider faster than Google. Imagine some form of authentication so only known good software can participate as part of it. Not sure how the system knows what is a valid upgrade yet but hey. You run the search engine in the background, it scans the net at whatever rate you set and maintains a small part of the DB. Naturally it would have to be Free software (not just OSS) to prevent someone getting control. I just had to throw this out there in the hope someone can figure out the hard parts and build it.

Google going downhill already

I tried searching for reveiws of some products this holiday season. I have a method of keywords I used to get me past the ads. This used to work great. The google slammers (or whatever they're called now) are getting much much better as a lot of what looked to be reviews were just sites selling. Uggg. Often I would have to go to page 2 and 3 to pick up real review. I ended up using sites recomended by a friend and searched there postings.

I've started looking for/using other engines already. Sometimes when you get too big everyone tries to trick the service into selling.

Like open source preaches options are really important to keep things going.

Re:Suck.

I can't see how an IPO is good for the company. Good for the employees, but not good for the company.

It's a one-time huge infusion of cash into the company. That money can be used to purchase equipment and hire new employees. So there can be plenty of good for the company.

The bad news is that you have to sell your soul to get the money. As I mentioned above, you are no longer in complete control of your destiny. I'm worried what will happen to google. Did they really need the money that badly?

GMD

IPO == VC Exit Plan

No necessarily good for employees either. Good for VCs, Kleiner Perkins in Google's case. They'll cash out at IPO. Most employee options have a lockout period where they cannot cash out (e.g. six months after IPO).

For all of you hyping Google's IPO, just ask yourself these questions: Who has the most to gain by Google's IPO? And does that entity have any vested interest in Google's continued success? Seriously, what purpose is there to Google's IPO other than paying off Kleiner Perkins?

This is probably the debate that has been going on inside Google for quite some time now (just my educated guess):

Google: Why go public? We're already profitable; we don't need to raise cash; we don't need to be beholden to stockholder whims. Going public will kill us. Just look at <just about every other internet stock>!

VC: We didn't invest in you to build a search engine. We invested to make a return on our investment. An IPO is going to provide the best return on our investment. The market is ready, dying really, for Google to IPO. We'll make a killing. Don't complain. You can make a bundle too, after your six month lockout ends.

Google: Well, what if our stock crashes before our lockout ends?

VC: That's too bad, but what do we care? We'll have cashed out on Day One.