Google Considering IPO Auction Online

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?"

Interesting, But Not Innovative

[Bloodmoon1]

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].

Original Financial Times Story

[Anonymous Coward]

Here [clickability.com] is the original FT story.

Re:Interesting, But Not Innovative

[EinarH]

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.

Re:IPO=Death

[SpaceLifeForm]

A company can be controlled without owning 51% of the shares. See board of directors.

Re:IPO=Death

[seschmi]

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.

Re:IPO=Death

[RedWizzard]

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

[10Ghz]

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:Microsoft

[borgdows]

the differences for the same search term between MSN and Google are TERRIFYING!!

Google search for 'linux' [google.com]

MSN search for 'linux' [msn.com]

Re:Uhm, yes, I would, but not immediately

[urbazewski]

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.