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Google Considering IPO Auction Online 271

Posted by Hemos
from the raising-the-funds dept.
HackerStickers writes "An article in the Financial Times states that Google could be considering doing their IPO online via an auction versus the standard methods of raising funds early next year. The article points out that auctioning it could bring in a larger chunk of cash for the company. Would you bid on a piece of Google?"
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Google Considering IPO Auction Online

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  • I think not. These shares are indoubtably going through the roof, so they'll be way too expensive for me. I mean, Google is supposed to be worth about 15 - 20 billion!
    • by Anonymous Coward on Friday October 24, 2003 @07:03AM (#7298774)
      Hey, unless you're a brokerage house, you'll probably end up paying what you would have, or maybe even a little less, while google will get considerably more.

      I don't see a down side to cutting out the old boy network. Hell, maybe it will be a trend, where merit as opposed to heredity or nepotism determine who can get ahead.
    • Didn't we learn anything from the '90s?

      I mean, there is no reason for google to go public other than greed. They are making plenty of money on their own right now and I doubt that they are in need of cash for business purposes.

      There is so much legalized criminal activity involved with public companies. For example, Netgear just went public and the underwriter (Lehman Brothers) had the option of printing up an extra *million* shares to "cover additional costs".

      Additional costs like a big party...
      • by ergo98 (9391)
        There is an SEC regulation [fool.com] that effectively forces Google to IPO (or to beg for an exemption), so it isn't "greed" but rather simply accommodating financial regulations.
        • by kfg (145172)
          I dunno. The regulation basically just puts them under SEC scrutiny as if they were a publicly traded company. It's basically an anti rackteering reg designed to "infiltrate" dummy corporations set up as money laundering operations.

          The corporate version of having to file with the feds if you spend $10k cash on something.

          This isn't really any more reason to go public than the filing requirement for private citizens is to not buy a car.

          I think it's really the pressure of the VC's looking to get in and the
        • by odin53 (207172)
          That rule doesn't force Google to do an IPO; it forces it undertake reporting obligations that are tantamount to being public (without the benefit of going public). It forces an issuer to register the appropriate class of stock under the 1934 Act and thus be required to file 10-Ks, -Qs, etc. Sucks to be there, unless you've gotten the benefit from an IPO, because it's very expensive to comply with those regs -- the lawyers are expensive, the auditors are expensive, and the liability for screwing up is pot
  • 100 million shares: 100 million auctions.
  • Auctions are an interesting way to do this but I expect that as usual with auctions the hype will cause the price to jump higher than it might otherwise. Then it will fall to a "normal" level (at which point I will buy some stock if I have any money left from selling my second Porsche), before gradually climbing up to dizzy heights (at which point I will sell my stock and buy three new Porsches).
    • by letxa2000 (215841) on Friday October 24, 2003 @07:52AM (#7298945)
      As they said, an auction would net Google more money. That means the investor would pay more which lessens the urge to actually participate. Of course, it at least gives you the option to participate in the IPO whereas normally only good friends of important people get to participate.

      It seems, though, that an auction will mean that everyone will pay the maximum amount for the shares rather than a tempting IPO amount. So instead of some people getting in at a $10 IPO value (for example) and riding it to $100, everyone will have to pay $100 each and there will be no IPO ride.

      What this means to me that there is no pressing reason why I should participate in the IPO. Presumably the auction will set a price very close to what it will be trading at when shares become available through traditional channels, so why bother? Just wait a few days and see how the stock moves. IPOs in the past have been tempting for investors because there is an expectation it will rise quickly, so everyone wants in. If the IPO is at the "already risen" stock price then there's no rush to get in at the very beginning since a few days later will be essentially the same price on the open market.

      This only makes sense for Google, and only the owners. As someone else has said, they already have good profit and I doubt they need more to grow the company. If the company doesn't have any plans on why it needs/wants $15 billion (other than to make a few owners rich) I'd be skeptical of giving it to them.

      • Historically the 12%-15% IPO discount to market has been thought to compensate for the additional due diligence needed to invest in a new issuer. Assuming that the big money boys price that into their bids, then us small money boys could buy on their due diligence coattails and get a 12%-15% step-up for free.

        As long as you believe that the market-movers actually know what Google's worth.
      • by urbazewski (554143) on Friday October 24, 2003 @09:31AM (#7299483) Homepage Journal
        So instead of some people getting in at a $10 IPO value (for example) and riding it to $100, everyone will have to pay $100 each and there will be no IPO ride.

        Good point overall, but remember for every person that sold a share of stock at $100 (got the ride up from $10) there's someone who bought a share of stock at $100. Presumably, these buyers either expected the value to continue going up in the short term or they expected it to go up over time. For every person who bought low and sold high there's someone who bought high. These people typically lose money --- historically IPOs have tended to be bad investments unless you flip fast.

        This only makes sense for Google, and only the owners.

        Basically, what they are doing is replacing the IPO round of trading with a mechanism that more closely resembles the stock market and creates equal access for buyers. (It's still a monopoly on the supply side of course.)

        The way that traditional IPOs create a windfall for people with investment bank connections (where stocks are typically priced low enough to ensure that they all shares are sold quickly, and then rise in value when they hit the market) has always struck me as a massive scam. It benefits the banks and their clients at the expense of the company and smaller investors without connections.

        The whole point of an IPO is to raise money for the company --- it's supposed to benefit Google, not well connected investors.

        As for the auction, the poster is absolutely correct: it's likely to suffer from the 'winner's curse.' The shares will be sold to the bidders with the very highest expectations for the stock value, making it unlikely that there will be a pool of even more bullish investors around to push the value of the the stock higher in the future.

        • As for the auction, the poster is absolutely correct: it's likely to suffer from the 'winner's curse.' The shares will be sold to the bidders with the very highest expectations for the stock value, making it unlikely that there will be a pool of even more bullish investors around to push the value of the stock higher in the future.

          Not only that, but the vast majority of IPO's come back down rather substantially right after the initial ride up (and then either go up again, or bomb completely...), here is
  • IPO=Death (Score:5, Insightful)

    by Marxist Commentary (461279) on Friday October 24, 2003 @07:02AM (#7298770) Homepage
    By becoming public, google loses the ability to continue with constant steady growth and innovative R&D. These things will invariably lead to short sighted planning by the management to "make the numbers" for the next quarter, 6 months, or year. "Growth" will be expected year after year - the innovative ideas that have made google so successful will give way.

    No, I won't bid on a share. I would hope that the IPO never happens, as google is still a quality company. I would hate to see that all change.
    • Re:IPO=Death (Score:3, Interesting)

      by gfxguy (98788)
      I don't know if it equals death, but I am thinking along the same lines. Is google not the most popular search engine? Does it not make enough revenue?

      If it doesn't make enough revenue, why would investors think this is a good deal?

      If it does, why would the private owner(s) have an IPO? Sure they can make a ton of cash - but aren't they doing that now? Obviously they are tired of the business and want to get out and make a lot of cash while doing it.
    • Re:IPO=Death (Score:2, Interesting)

      by koh (124962)
      By becoming public, google loses the ability to continue with constant steady growth and innovative R&D.

      "Growth" will be expected year after year - the innovative ideas that have made google so successful will give way.

      So you say that if people obsessed with growth show up, google would magically lose the ability to grow ?

      the innovative ideas that have made google so successful will give way

      Of course you realize that google stands up as an example for many, and that doing the IPO online maybe w
    • No, not death, but a fate far worse than death.

      Google would end up being controlled by Microsoft.

      • Re:IPO=Death (Score:2, Interesting)

        by falconed (645790)
        Google would end up being controlled by Microsoft.

        You're insinuating Microsoft would do a hostile takeover of Google. IIRC, Microsoft would have to own 51% of the company by buying shares of the IPO (or acquiring them later on, etc). This is only possible if Google releases 51% of their shares when they go public. The company [yahoo.com] I work for recently went public and did not want to have to worry about a hostile takeover (we're relatively small - our competitors would gobble us up if they had the chance) so t

      • by AlecC (512609)
        Google would end up being controlled by Microsoft.

        How about the other way round? According to the article, if Google whip up enough hype among private investors, they could raise $100bn. Microsoft is worth a bit over $300bn, so they take that $100bn and make a 25% cash, 75% stock offer for Microsoft. And Microsoft end up being run by people with the understanding of real value and service that Google has.

        No, I don't believe it either, but it is a nice thought.
    • Re:IPO=Death (Score:5, Interesting)

      by seschmi (531566) on Friday October 24, 2003 @07:26AM (#7298865)
      It actually depends on the expectations of the shareholders, if an IPO leads to the death of a company. Normally a company is expected to be worth a certain multiple of its earnings (or better, the cashflow, because cashflow is difficult to forge). A normal multiple would be 10, which gives me a 10% return rate (I buy the company for 100 and get 10 out of it every year). If google has USD 100 Mio of earnings, it's worth would be USD 1000 Mio, if valued this way. This of course would be a fair value, because it enables them to pay their investors an annual dividend of 10% of the stock price, even without any growth. In this scenario, they could stay in their search-engine-business, something they can (obviously) handle successful. The problem is, google will not aim at a valuation of one billion, they will aim at a valuation that is about ten times higher. And that means, they will have to grow a lot in a short time, something that will propably kill them.
      • Re:IPO=Death (Score:3, Interesting)

        by I8TheWorm (645702)
        Just a little bit of clarification. It's the P/E Ratio (Price to Earnings) that investors are concerned about. The average over the long haul for the S&P is about 16%. During the DotCom boom, the average P/E ratio of those companies was somewhere in the 40% range... WAY off the map. Anything bought below the norm is considered a value stock, anything above is considered a growth stock.

        Either way you slice it, the typical investor is concerned with the P/E, as you mentioned. The problem with that
        • Re:IPO=Death (Score:3, Informative)

          by seschmi (531566)
          Just a larger bit of clarification:
          • The P/E ratio ist usually not expressed in percent, but as a number. So "16" means the value of the company is 16 times the earnings, which is quite high for my taste
          • Another ratio is PEG (Price/Earnings/Growth), where the P/E/Ration is divided by the long-term Growth rate. Values below 1.0 are good.
          • Furthermore, you should not forget dividend yield - while dividend where extremely unpopular in the US for a long time, even Microsoft pays dividend now.
          • True on the dividend yield information. What makes it unpopular in the US is the difference in taxing of the earnings. If it's reinvested by the company, it's taxed at the regular rate for the shareholder. But if it's paid out, the investor can reinvest it themselves, or take a capital gain (at the cap gains tax rate which could be lower for the investor), provided it was earnings that accrued in less than one years time.

            And you're right... I flubbed on the % in P/E ratio (even though it really is a %,
    • Re:IPO=Death (Score:4, Interesting)

      by Ab0rtRetryFail (549588) <floydru@hotm[ ].com ['ail' in gap]> on Friday October 24, 2003 @07:33AM (#7298884) Homepage
      Quoth the Leftist Analysis:
      "By becoming public, google loses the ability to continue with constant steady growth and innovative R&D. These things will invariably lead to short sighted planning by the management to "make the numbers" for the next quarter, 6 months, or year. "Growth" will be expected year after year - the innovative ideas that have made google so successful will give way."

      I think that Google could still do this as a public company. There are a handful of companies now that do NOT issue quarterly guidance, focusing instead on the long-term (like they should, IMHO). These aren't small companies either -- I know Coca-cola does it. Google doesn't necesarily have to issue quarterly guidance if it doesnt want to. I think it has a commanding enough position (and certainly would have a top spot on the exchange if they went public) to not have to kowtow to the Street. I for one would LOVE a Google IPO -- the interest it would create would be tremendously beneficial to my portfolio. I don't think would signals the end of the Google we all know and love -- selling shares to the public is not the same as selling your soul. As long as Google has smart, talented people working for them, and as long as they gaze over their shoulder to see Yahoo and M$ breathing down their throat, I think they'll stay the same, IPO or not.
    • Re:IPO=Death (Score:5, Insightful)

      by leerpm (570963) on Friday October 24, 2003 @07:39AM (#7298906)
      "By becoming public, google loses the ability to continue with constant steady growth and innovative R&D. These things will invariably lead to short sighted planning by the management to "make the numbers" for the next quarter, 6 months, or year. "Growth" will be expected year after year - the innovative ideas that have made google so successful will give way."

      Actually, quite the opposite. By staying private they lose the ability to keep the talent on board by issuing those high-valued employees stock in the company. Sergey Brin himself has mentioned this several times in the past. While being private gives the company more freedom with its financial affairs, it needs an IPO to keep growing and move forward.
      • Re:IPO=Death (Score:4, Insightful)

        by seschmi (531566) on Friday October 24, 2003 @08:05AM (#7298986)
        With an IPO, you simply get the ability to pay in promises instead of cash. If you promise to grow X per cent during the next y years, this will raise the share price and capital increase will exchange that share price for cash.

        Same with the employees - instead of giving them more cash, you give them promises (called "stock options").

        Sounds nice, the only question is wether people believe you or not. I've myself owned promises (stock options) worth several millions some time ago (worthless now, of course), so I prefer cash instead.

        Furthermore: You don't need an IPO to give shares to your employees. Shares entitle their owners to get parts of the earnings, so if the company performs well, the employees will participate in this, even if the company is not public.

      • Re:IPO=Death (Score:3, Informative)

        by RedWizzard (192002)
        What are you talking about? This is not insightful, it's wrong. There is nothing to stop Google's owners from issuing stock to valued employees.
      • Re:IPO=Death (Score:3, Informative)

        by 10Ghz (453478)
        By staying private they lose the ability to keep the talent on board by issuing those high-valued employees stock in the company.


        How so? Just because the shares are not publicly traded does not mean that the company does not have shareholders. Why couldn't Google give employees shares in the company and give the bonuses through dividends for example? Company does not have to be publicly owned for that.
      • Re:IPO=Death (Score:3, Interesting)

        by blizzardsoup (710498)
        By staying private they lose the ability to keep the talent on board by issuing those high-valued employees stock in the company.

        The valued employees already very likely own stock and/or stock options in the privately held Company. When private Company goes public (IPO), the private stock simply gets converted to public stock.

        Many employees now busting their humps 12+hours a day will dump their stock ASAP, call in rich, and lose quite a bit of incentive to put in more than 8 hours. I've personally s


      • Actually, quite the opposite. By staying private they lose the ability to keep the talent on board by issuing those high-valued employees stock in the company.

        That's the kind of thinking that killed the tech boom. The way to keep employees is to pay them what they are worth, treat them well, and be honest with them. You may lose the ones that would rather by treated badly and lied to, but you are actually better off without them.

        On the original point, you may also lose the potential for unrestrained

    • by 23 (68042)
      So what exactly would magically change, if their shares were publicly traded as opposed to being held privately by quite a bunch of VC's [google.com]???

      Personally, I don't buy all this hipocrisy outside money supposedly destroying the company. Google would probably be long overtaken by some other company had it not gotten outside capital [google.com] to fund growth and we would not have one of the coolest web-services around.

      And although the dot.com-boom is over, the fundemental paradigm of web-services still exists: practic

    • Re:IPO=Death (Score:4, Insightful)

      by Safety Cap (253500) on Friday October 24, 2003 @08:01AM (#7298975) Homepage Journal
      Google is punking out. The reason they are doing this is to sidestep underwriters and their fees.

      If they go public, there will be greater pressure to avoid "controversial" stories about them that will affect their stock price. If Google had been a publicly traded company back in the day, then the scientology/operation clambake [xenu.net] thing might have gone down much differently (and worse for the public).

    • Re:IPO=Death (Score:2, Interesting)

      by sdcharle (631718)
      Yeah, but...

      A recent issue of Barron's points out Google has reached conditions that require it to make reports to the SEC, much like public companies are required to do. It's a 1934 law which takes affect once companies have 500 shareholders and $10 million in assets. There's a reference to it on Motley fool: Gunning for Google [fool.com]

      So, while you're right, and realize unlike some others around here that IPOs are not pure good, for Google, if they have to open up their business like this and make these rep


    • You couldn't be more right. There is a HUGE difference between a private and a public company. Private companies can still take a hickey on short term earnings during heavy R&D. If a public company were to do that these days, the entire board and C*O staff would be out the door... replaced by some suits that only care about the next earnings report.

      When a private company does really well, an IPO can be a painful death. Of course, it could also mean the owner(s) want to cash in and move to the Baha
    • the innovative ideas that have made google so successful will give way

      Well, but these guys have to cash out on their hard work sooner or later.

      Innovation -> IPO -> Stagnation

      is a natural cycle that gives an opportunity for others to succeed. On the other hand

      Innovation -> IPO -> Stagnation -> Chapter 11 -> Govt Help -> Reimergence

      (think worldcom) is a terribly unnatural cycle, one where everyone loses.
  • by WIAKywbfatw (307557) on Friday October 24, 2003 @07:03AM (#7298772) Journal
    I'd pay $20 a share for a stake. Uhh, I mean $22. No, wait, make that $24. Did I say $24? Darn, I meant $26. No, I take that back, what I really meant was...
    • Re:Yeah, I would... (Score:3, Interesting)

      by Thing 1 (178996)
      It'd be even cooler if they did their IPO on eBay.

      Top that: eBay doing its IPO on eBay! (I know, I know, they're already public, don't let reality get in the way of a cool fantasy...)

    • "I'd pay $20 a share for a stake. Uhh, I mean $22. No, wait, make that $24. Did I say $24? Darn, I meant $26. No, I take that back, what I really meant was..."
      • There's a job waiting for you at SCO with steadfastness like that.

  • by John_Booty (149925) <johnbooty.bootyproject@org> on Friday October 24, 2003 @07:03AM (#7298775) Homepage
    When you open up your company for outside investment, that's when a lot of companies go to shit. When you're privately-owned, you can be content to simply turn a nice profit every year.

    When you have an IPO, though, your company is worthless to investors unless you continually grow and grow and grow.

    Google could continue doing what they're doing right now and maintain a constant level of profit (assuming they're profitable right now, which they supposedly are). But if they hae an IPO they're going to have to try more and more ways to wring more and more money out of investors and users. Get ready for what may be the slow degradation of one of the last "pure" and amazing things on the web...
    • I'm responding to this post [slashdot.org] as well, since they're a bit contradictory.
      • By becoming public, google loses the ability to continue with constant steady growth and innovative R&D
      • your company is worthless to investors unless you continually grow and grow and grow
      So, which is it?
      • I'm responding to this post [slashdot.org] as well, since they're a bit contradictory.
        * By becoming public, google loses the ability to continue with constant steady growth and innovative R&D
        * your company is worthless to investors unless you continually grow and grow and grow

        So, which is it?


        They're not quite contradictory- the thing is, with outside investment, there's a lot of pressure for QUICK growth. The investors have just poured X million dollars into your company, they want results, an
      • It's only contradictory on first sight. Actually, investors in publicly traded companies are quite nearsighted, because they can sell their shares every time they want. What they are looking for is an abrupt raise of the share price, no matter what comes after this, because they will sell their shares at the maximum price anyway.

        Investors in private companies can't act this way. They know it will probably take years to sell their shares, or probably they will never sell their share but get their return f
    • So let's change the situation. Companies always do what is in the interest of its shareholders, and if all its shareholders was geeks, then ____ . [fill in the blank]
    • In reality companies either grow or shrink, it's next to impossible to keep them at a steady profit. But that's beside the point - why wouldn't you want your company to grow?

      A more interesting question is: why do they want to float? This is normally because the business needs massive capital investment in order to achieve it's objectives, but it seems that google already has sufficient infrastructure, market share and R&D capability. If it's making good profits, why share them with other people? C

      • In reality companies either grow or shrink, it's next to impossible to keep them at a steady profit. But that's beside the point - why wouldn't you want your company to grow?

        Of course you want your company to grow, but growing too quickly can be a very bad thing- that's the only concern. It happens a lot, with or without outside investment. We had a local chain of pharmacies around here. They were around for years and years, so I assume they were in the black. At some point they got too ambitious an
      • why do they want to float?

        Because they have investors. Investors are interested in getting their money back, plus some. If the shares aren't registered, they can't sell them for a decent price in a reasonable period of time (reasonable here meaning within the ten-year life of most venture funds.)

        Venture backers of Google include Kleiner Perkins and Sequoia. These VCs desperately need a win in their portfolios right now. They've held the investment for over four years, and even if an IPO was announced
    • >When you're privately-owned, you can be content to simply turn a nice profit every year.

      Actually it really depends who already owns the company. If its owned by venture capitalists, then they will not be happy with a steady profit and will shake things up (for better or worse) depending on what they want.

      If its just a few people, then you risk stagnation. "It worked before, just keep on doing it." or "I don't like this new fangled way and I don't have to change."

      >Get ready for what may be the sl
  • by merryprankster (591989) on Friday October 24, 2003 @07:06AM (#7298790)

    Every day punters are likely to want a piece of Google in a big way. The global reach of the brand and the sentimentality with which the everday web user regards it mean that folks are likely to think that it is worth investing in. But this is where where the auction model completely falls down.

    The article states that the price could get pushed up as high as $100 billion in an auction - for a company that makes $150 million a year??! This is complete .con madness.

    Google directors get to save a small percentage of the billions they are going to make by skipping on underwriting charges, but the potential for the price being pushed to an artificial high in a auction before a catastrophic crash are large.
    • Google directors get to save a small percentage of the billions they are going to make by skipping on underwriting charges, but the potential for the price being pushed to an artificial high in a auction before a catastrophic crash are large.

      I am fairly new to the finance field, but the way IPO's generally work as I understand it is that the underwriting investment banking firm tries to define a target price for the stock, and then buys the stocks for that price minus a spread that serves as the underwrit
  • who want's a piece? (Score:3, Interesting)

    by millette (56354) <robin@ m i l l e t t e . info> on Friday October 24, 2003 @07:08AM (#7298797) Homepage Journal
    First, some hype:
    • "They could get a $100bn" stock market value, said one person involved.
    • "It will be worth $15bn-$25bn," said one person who has been involved in the process. "This has never happened before."
    Next, more hype:

    Though the company does not disclose financial information, its profits are growing rapidly and are reckoned to be running at an annual rate of about $150m on revenues of $500m.

    Anybody got a name??

  • Maybe not... (Score:2, Interesting)

    by seldolivaw (179178) *
    Since Google is broken [google-watch.org] at the moment. I'll see if their search technology can continue to scale...
  • by MarsDude (74832) on Friday October 24, 2003 @07:11AM (#7298815) Homepage
    but only on the L or the E.
    There are 2 of the G and O, so they'll be less valuable over time.

    Unless those disappear one day. But then you ogle :-)
  • Strangely enough, google asking for money for an IPO reminds me of the south park episode, with the sucubus and chef's dad.

    He says, "And you know what that Loch Ness Monster said? He said, 'I need about tree-fiddy.'"

    Maybe that's how much I'd give 'em.. but then they may want another tree fiddy. :\
  • by Bloodmoon1 (604793) <.be.hyperion. .at. .gmail.com.> on Friday October 24, 2003 @07:13AM (#7298820) Homepage Journal
    While interesting, this isn't the first time [bizjournals.com] a company has done this. In April, 1999 a company called Ravenswood sold 1,150,000 shares online in an IPO auction. Several other companies since have, including Salon.com and Andover.net. Here's a summary of how they went [wrhambrecht.com].
    • Thanks for the info.

      Mod parent up, please!

    • Andover.net
      (OpenIPO auction - completed 12/8/99)

      Andover.Net is the leading Linux/Open Source destination on the Internet. Their network of Web sites provides an independent, unbiased source for content, community and commerce for the Linux and, more generally, the Open Source communities.

      Results
      -4,600,000 shares priced at $18.00 per share
      -Filing range increased from $12-$15 to $15-$18
      -First day closing price of $63.38

      350% on the first day...
      Ahh, those were the days.

    • The only people who did very well were the coffee-makers. Google coffee anyone? Nogatech didn't start out well but improved once acquired.

      And yes, these numbers don't account for dilution. How much free time do you think I have?

      Ravenswood Winery (RVWD)
      IPO: $10.50 per share
      Currently: Delisted.

      Salon.com (SALN)
      IPO: $10.50 per share
      Last: $0.06.

      Andover.net currently Va Software Corp (LNUX)
      IPO: $18.00 per share
      Day 1 Close: $63.38
      Last: $4.65

      Nogatech, acquired by Zoran in Y2K
      IPO: $12.00 per share
      Day 1 Close: $
  • Wow! I kinda laughed when I saw the claims about Microsoft's search engine overtaking Google. Now it looks like it will probably happen. Once Google goes public and scares everyone away with lame ads and lame pricing, Microsoft will rule. This is highly unfortunate. I really can't believe it.
  • by eforhan (631605) on Friday October 24, 2003 @07:24AM (#7298857)
    ...would be a one with one hundred zeros following.
  • by optisonic (202402) on Friday October 24, 2003 @07:27AM (#7298867)
    Google is one of the few companies that regularly and consistently produces USEFUL functions for the world on a large scale. No one competing for the same market segment even comes close at this time.

    Unfortunately when companies IPO, that means that they lose control over company direction and quality. As soon as people have a vested interest in the company, the race to profitability is on. This hurts the development cycle and the processes which control the quality of product. Investors are very demanding and GREEDY. Greed always rears its ugly head and forces companies to release more quickly and with lower costs to attain the extreme profitability that is required by the public.

    Sure if you buy in then you can get a cash cow and end up sitting pretty for a while. Just know that over time people always want more money faster than it is currently being earned. This results in unrealistic schemes to achieve such goals.

    Some would argue that more money means better product, but I know first hand that more money means more greed and investors would rather have money than good product. This means more regular changes internally to keep up with good profitability ratings.

    Fortunately others are starting to compete for this space as well and even if Google looses it's cool due to investor demands, others will be ready to seize opportunity for improvement. Too bad it likely won't be the same Google that we (everyone I know) love today.

    -BJ
    • Just because Google is privately held does not mean that they do not have investors. From Google's own site:

      Google is a privately held company with primary financial backing from Kleiner Perkins Caufield & Byers and Sequoia Capital, which together led an equity round of $25 million in June 1999. Google also has benefited from several other high-profile investors, including Stanford University, Andy Bechtolsheim (co-founder of Sun Microsystems and current vice president of engineering of the Gigabit Sw

  • Noooooo! (Score:3, Insightful)

    by adrianbaugh (696007) on Friday October 24, 2003 @07:36AM (#7298891) Homepage Journal
    Don't do it google! Sure, you'll get a bit of cash but you'll be selling your soul. Once you're in public ownership the only thing that is allowed to matter is shareholder returns, which will inevitably mean you turn into some sucky kind of portal with online shopping, instant messaging and all the crap I don't want from a search engine. This will happen regardless of whether the current people want it to or not - they'll just be voted out at an AGM, or sued for failing to maximise shareholder value.
    So: google, consider this a plea. Remain smaller than you undoubtedly could become through an IPO, but retain your integrity and the essence that makes you great.
  • "However, all the shares would end up with Aunt Agatha in Des Moines and Uncle Milt in Pittsburgh and there would be no real public market at all."

    I'm not too investment savvy, but isn't this EXACTLY what a public market means? Public, as in The Public; and Market, as in a place to buy and sell?

    It -sounds- like he's saying that he's worried about the Public actually using their purchasing power. God forbid we take the future of something we value out of the hands of the people who brought us Enron, Worl

  • by Fritz Benwalla (539483) <randomregs@nOsPAM.gmail.com> on Friday October 24, 2003 @07:49AM (#7298928)

    Of course they'll make more money with a Google-run auction:

    "I bid twenty dollars per share"

    Did you mean: thirty dollars per share?

  • Of course not.
    I haven't seen any financials.

    Will the company change if it goes public?
    If it isn't the google of today and becomes a crappy add loaded POS, it isn't the google cash machine I think it should be.

    Assuming google is profitable now, just keep providing a class leading product, improve it so that there is no effective competition.
    Should be capable of consistent profitability for the long term.
  • Forseenable, but I don't like the idea so I'll go looking for alternatives as "cool" and "IPO" are two words that don't mix.

    Are there any good search engines out there as Google is about to go down the drain in a bubble of hype?
  • After all, going public did wonders for Yahoo, right? I'm fearing the day that the Google homepage will look like Yahoo's. Yahoo has 3,413 characters of text on the frontpage, quite a bit of which is ads, while Google has 199. I know that google is sensitive about this, but when you sell stock and have investors calling the shots on what you do, you lose your say in the matter.

  • I want it NOW (Score:5, Insightful)

    by wowbagger (69688) on Friday October 24, 2003 @08:28AM (#7299078) Homepage Journal
    I want it NOW

    This is not a reference to the Google stock, but rather to the pervasive attitude in today's society that is leading to our downfall as a civilization.

    I want it NOW - as in, "I am unwilling to wait, and do the sensible thing, so I will do something completely stupid to get this right now."

    Rather than waiting to earn and save enough money to buy (that plasma display|that new video card|that big SUV|...) people just charge it on the ol' credit card. Result - most of their income goes to servicing their debt.

    Companies are like this, as well. Rather than borrowing money from a bank, or folding some profits back into R&D, they look for the immediate solution - "Let's sell off part of the company!" Unfortunately, unlike a bank debt which is designed to go away after a time (when you pay it off), selling off part of the company as stock is almost impossible to reverse. True, a company can try to buy back the outstanding shares, but as they do so, the cost of the outstanding shares will rise, and they are unlikely to ever be able to buy them back.

    And I am sorry, but any employee who is swayed by stock options IS A TOTAL FSCKING MORON. The only way stock options are valuable is if the stock price of the company significantly increases from the time the options are granted to the time they are vested. As other posters have pointed out, this leads to a company trying to grow continuously, which is simply not possible. As a result, eventually you will get stock options that don't significantly appreciate in value.

    There are better ways to "incentivize" an employee (that was the very term that was used by my boss as I was offered stock options - which were so far under water when the company was bought out that I was offered one whole dollar for the lot). A profit sharing plan, in which a percentage of the company's profits are credited to an account in the employee's name, with a vesting period, is FAR MORE effective at giving a key employee a reason to stay than stock options - the employee can SEE the value, can SEE the exact amounts of money he is walking away from, and that value DOES NOT FLUCTUATE as the market varies - hence the employee is unlikely to walk away at an uptick, as upticks and downturns simply don't happen.

    Lastly, the whole purpose of playing the stock market has changed. It used to be a means by which you invested you money in a stock in return for dividends - converting cash into an annuity, thus attempting to guarantee youself an ongoing income, while still having the money available for use if needed. In that mode, the stock market is a non-zero sum game - you can gain value without somebody else losing value.

    But now, the stock market is played like a trading card game - the idea of holding a stock for years is gone, buy it today and sell it tomorrow, lather rinse repeat. When it is played like that, the stock market becomes a zero-sum game - if I make money on the market somebody else had to lose - if I bought it low from you, then you lost your chance to make money, and if I sell high to you, you are losing money to me.

    As a result, since in a zero-sum game everybody is in direct competition with everybody else with little motivation to co-operate, you get the "dog-eat-dog" mindset we see today.

    No, I hope Google does NOT IPO. Yes, it would be nice to be able to buy a few shares of a well-run company who's management is planning for the long term. However, the odds of Google remaining such a company after IPO are vanishingly small. To paraphrase Marx (Groucho, not Karl) - "I wouldn't want to own stock in a company that would sell it to me."
    • "And I am sorry, but any employee who is swayed by stock options IS A TOTAL FSCKING MORON. The only way stock options are valuable is if the stock price of the company significantly increases from the time the options are granted to the time they are vested."

      Not necessarily true. In general, the idea behind options is to issue them below the current market price, then after a period of a few years, they vest and the employee can cash them in for real stock. So it works even if the company's stock stays e
    • And I am sorry, but any employee who is swayed by stock options IS A TOTAL FSCKING MORON.

      Microsoft have more millionaire secretaries and millionaire-ex secrataries than most companies have employees.
      Are they all morons?

      The only way stock options are valuable is if the stock price of the company significantly increases from the time the options are granted to the time they are vested. As other posters have pointed out, this leads to a company trying to grow continuously, which is simply not possible.

      Y

  • IPO?!?!

    Here come the MBA's... There goes Google. :/

  • by *weasel (174362) on Friday October 24, 2003 @08:40AM (#7299161)
    ... particularly after reading what those offering-banks were doing during the boom.

    Not only were investors dumb with their money, but there was a sea of illegal under-the-table action building up those numbers.

    Recap: When Amazon does an IPO, they get a bank to handle the deal. That bank first sells shares in large chunks to other very large banks, who then sell to other less-large banks, who then sell to you and me.

    Brokers at the offering bank would cut deals with would-be 1st tier purchasers, offering them a chunk of shares for a good price, but only if they agreed to buy more shares at the inflated price (illegal) - further inflating the perceived value (if you see smith barney still buying a .com with no revenue at $20/share, one normally assumes they know something you don't).

    The would-be purchasers wouldn't want to back out on the deal, after the good price, or else they'd be cut off from getting in early on other IPOs offered by that bank. (few banks actually do IPOs) Similarly, they sure wouldn't want to take a hit for their own company (it'd be their ass) if that second block of shares turned out to be overvalued - so they gussied up their forecasts to convince other investors that a company really -was- worth the secondary inflated price (illegal).

    They made millions on everyone else losing billions.

    Given that, if Google does their own IPO straight-to-the-people, day-traders and herd mentality could easily drive the prices up to bubble-era prices. Of course, on the other hand, it's much less likely that there's shady deals going on.

    Though I'd imagine they'd only sell a small block of shares that way. One doesn't usually turn away a billion dollar brokerage firm who wishes to purchase in significant quantities.
  • Google isn't as effective today as it was a year ago today. Their searches are screwed up with innane irrelivant material.

    Couple that with an IPO auction, and soon, we'll need to be a subscriber for "premium" features on Google, such as the ability to put an "and" in your search, or post on the Google "forums" where you can chat with your friends about how great Google is.

    In my opinion, IPO doesn't mean better at all.
  • What if google's auction goes for $10? Someone could make a deal with eBay to rig the auction... sounds like a bad idea to me.
  • It's been said elsewhere on this thread, but an IPO will turn Google into a short-term profit chasing company. It will destroy their R&D work and they will no longer be able to make decisions for the benefit of their users. Watch for obnoxious (and less effective) advertising. Watch for pay for placement. Watch for the killing of the goose that laid the golden egg.

    Ask the (ex)president of any good customer focused company that went IPO more than a few years ago. After a brief thrill the fun will b
  • That is to say, being lead by a few with vision is better for google than those that want to make money off of it. Why do I feel like the front page of google will suddenly look like yahoo.com? Who doesn't want an email@google.com? They'll start selling those out. How about hosting some webspace? A company-only pay-to-be-on-search engine?

    No. The fact is that with these kinds of things, the dream dies with the creator and product soon fails after. Now the google guy(s) aren't dead yet but this pretty
  • Deja Vu? (Score:5, Interesting)

    by plasticmillion (649623) <matthew@allpeers.com> on Friday October 24, 2003 @09:23AM (#7299416) Homepage
    The interesting thing about this story is not the potentially bloated valuation that Google will aim for. Did you think that people learn from their mistakes? Come on, now! The Google founders have the right to be billionaires too, dammit. Much more relevant is the idea of using an online auction for the IPO. I guess this is common knowledge, but generally IPOs go through an investment bank like Goldman Sachs or Morgan Stanley, who feed the IPO shares to their valued customers for some artificially low price. Everyone makes money... unless, that is, you're not already rich.

    I've felt for a long time that this is an affront to capitalism (yeah, I'm a capitalist... go ahead and mod me down). The only people who make big money did essentially nothing to earn it, besides the company founders who took big risk and make less than they could since the banks keep the price down to make sure they sell the whole float.

    At the same time, we've been here before, as this Forbes article [forbes.com] from early 2001 describes. Earlier efforts to make IPOs more efficient and democratic failed. It's not clear to me whether this was due to the coincidental collapse of the tech IPO market, or whether it was the result of a coordinate sabotage effort by the big investment banks. (Or maybe, just maybe those banks really do add some value by getting their big customers to serve as market makers).

    Google has about as much market clout as I can imagine, so if they decide to go for it, this will serve as a good acid test. If the IPO goes off successfully as an online auction, this probably means that the earlier efforts were just bad timing. If it fails, I might smell a conspiracy.

  • IPO 101 Lesson (Score:2, Interesting)

    by blizzardsoup (710498)
    To those who think that Google will turn into a mindless profit-driven machine once it IPOs, here is the current board of directors for Google Inc.
    • Dr. Eric E. Schmidt, Google Inc. Chairman of the Board
    • Sergey Brin, Google Inc.
    • Larry Page, Google Inc.
    • John Doerr, Kleiner Perkins Caufield & Byers
    • Michael Moritz, Sequoia Capital
    • Ram Shriram, private investor

    The sole reason that Kleiner Perkins, Sequoia, and Mr. Shriram are represented on the board is that they invested millions in Google. I sincerel

  • Google's Motivations (Score:3, Interesting)

    by kallistiblue (411048) on Friday October 24, 2003 @09:42AM (#7299574) Homepage
    I'm intrigued that google is still interestted in going public. Being a public company means that google will be working for the investors rather than doing what google does best.
    My guess is that they:
    1.go public
    2. gets lots of cash
    3. Buy back company and privitize after price comes back down.

    I also think that google is using the muscle to hopefully make some good changes to Wall Street.
    Even when things were good in '97 and '98, Wall Street's actions always looked criminal to me.

    Wall Street consistantly ended up giving companies going public only a fraction of the price that the company closed at after the first day of trading.
    Why is this a problem?
    Well a company going public is essentially selling a % of their company to raise capital.
    Let's say we have a company that we are willing to sell 20% to raise $20 million.
    To do that, I have to sell 2 million shares at $10 a share.
    If the stock closes at $20 at the end of the first day, as the IPO'd company we still only raised $20 million dollars.
    If the I-bankers did their job correctly, we could have only sold 10% of the company and still raised the same amount of cash ( $20 million ). Instead, we were forced to sell 2x as much ownership of the company as we should have.

    The investment banks pocketed all the additional money. The most common structure of an IPO is that the underwriters purchase all the stock from the IPO company and then sell it from their books as trading occurs.

    As I understand it, the biggest task a IPO underwriter performs is evaluating what a share of a stock will trade for in the market. If you look at their historical accuracy of doing this, you'll see how poor a job they do at this.

    Why does Wall Street still exist?
    Legislation

    Look at the effeciency of NYSE vs Nasdaq. No comparison.
  • by avi4now (567861)
    At the bottom of the article:

    "They could get a $100bn" stock market value, said one person involved.

    "However, all the shares would end up with Aunt Agatha in Des Moines and Uncle Milt in Pittsburgh and there would be no real public market at all."

    What the hell? This anonymous coward is a real elitist! Aren't private individuals exactly who comprise the "public"? The first four definitions of "public" from dictionary.com: [reference.com]:

    1. Of, concerning, or affecting the community or the people: the public good.
  • If Google needs to raise capital to buy capital equipment (more server farms, etc) they otherwise wouldn't be able to pay for, OK. If they need the money to hire people they don't currently have the cash to hire, OK. But it sure sounds like they're just cashing out.

    Ideally, Google should stay private and either implement a profit-sharing plan or give employees equity in the company and pay dividends. Of course, dividends are still double-taxed (taxed at the corporate level and taxed again when received
  • Would you bid on a piece of Google?

    No

    Tech bubbles...seen one, seen them all...can you say 'about to burst?' [business2.com] Buy Google and watch it tank within 6 months...
  • Soon after they go public, they'll try to monetize searches by charging a subscription fee, or adding Salonesqe intrusive ads. At that point, worthwhile sites will start blocking the Googlebot. From there, it's a death spiral.

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