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Google IPO Game
EquityMind




msg:1234059
 3:23 am on Apr 30, 2004 (gmt 0)

In the true tradition of WebmasterWorld and all of us trying to guess various aspects of timing of Google Dances etc. why don't we try and guess the opening bid price for the IPO as well as the first day close price?

My first pass is a $22 open price with a $40 close price.

(I may change this after I finish reading this 164 page S1 filing but hey, I had to start somewhere...)

EquityMind

 

loanuniverse




msg:1234060
 4:31 am on Apr 30, 2004 (gmt 0)

The auction model will decrease volatility as people will get in at the price that they are willing to pay or will remain locked out. However, if they do put a cap on the number of shares allocated to a single individual and not just on price, there will be some unsatisfied demand after the initial allocation.

Once the target price per share is announced we can speculate on the average winning bid price {or bid price} and the closing price.

donpps




msg:1234061
 6:18 pm on Apr 30, 2004 (gmt 0)

I was thinking start at $25 a pop ending at $49.87

I have a hunch about these things.

pdb730




msg:1234062
 6:24 pm on Apr 30, 2004 (gmt 0)

How about we wish for an opening price of around $20 and a closing price of around $45

Dpeper




msg:1234063
 6:28 pm on Apr 30, 2004 (gmt 0)

Open: $31
Close: $57

blaze




msg:1234064
 6:49 pm on Apr 30, 2004 (gmt 0)

I would think with the auction style, there will at most a 20% difference between the opening and closing price.

gopi




msg:1234065
 8:58 pm on Apr 30, 2004 (gmt 0)

>> there will at most a 20% difference between the opening and closing price

Me too

ThatAdamGuy




msg:1234066
 10:37 pm on Apr 30, 2004 (gmt 0)

I'd like a piece of the pi :)

START: $31.416
END: $54.366

(I am the knight who says EE!)

jbgilbert




msg:1234067
 10:40 pm on Apr 30, 2004 (gmt 0)

I don't want to mention a site (my site), but if the modertors want we can set up a poll somewhere.

Even a poll here would be fine.... any thoughts?

glitterball




msg:1234068
 11:00 pm on Apr 30, 2004 (gmt 0)

excuse my ignorance while I ask this question:

Does anyone think that this will be the type of IPO that any member of the general public can subscribe to and then sell their shares on the opening day at a huge profit?

blaze




msg:1234069
 11:13 pm on Apr 30, 2004 (gmt 0)

Anyone can subscribe to it, whether or not there will be a huge profit is hard to determine.

Considering that this sort of thing is new, I think there is a chance that it could go either way.

My advice to you is to get your bid in at something lower than you think the company is fairly valued at.

If, for whatever reason people are very lazy and you are fortunate enough to get shares at that price I do believe you will have a chance to 'hugely profit' (depending on your initial investment).

EquityMind




msg:1234070
 5:09 am on May 3, 2004 (gmt 0)

I'm changing my predictions. I've poured through the S1 and done some research. Now I'm speculation an opening price of 81 and a close of 121 per share.

EquityMind

blaze




msg:1234071
 6:24 am on May 3, 2004 (gmt 0)

Are you refering to this?


The Company’s Board of Directors has authorized two classes of common stock, Class A and Class B. The Company had authorized 400,000,000 and 300,000,000 shares and at December 31, 2003 there were 11,220,718 and 161,632,445 shares legally outstanding of Class A and Class B common stock.

I'd be curious to know how you arrived at your conclusion.

I have no clue as to what the initial estimation is going to be .. if I did I'd be a zillionare by now. However, I am pretty sure that the difference is not going to 50% as you have stated above.

claus




msg:1234072
 7:24 am on May 3, 2004 (gmt 0)

I tend to think a fair price would be around 1.5 times the YHOO price (right now it's around 50, that would mean 75 or so for G) - YHOO should see a conglomerate discount just like with non-www stocks, but i would be careful and set it below 50% as they do have the oldest brand and have made some recent aquisitions that makes sense. Still, after the IPO was announced YHOO have dropped.

I'm not suggesting they start or close at a fair price though, it might close at three times the realistic price level or more due to all the buzz, and it might even get below opening price at some point during the day. Professional investors do remember the dot-com bust, they will want to be careful, so either they buy long term positions or they don't. Most trade might be private investors and high-risk profiles who of course can make the market jump around in all directions if they really have appetite.

Oh, and btw i'm sorry non-US residents are not allowed to Googlegamble ..erm.. invest

Sharky




msg:1234073
 7:50 am on May 3, 2004 (gmt 0)

Google is clearly going to be one of the most-hyped stocks in history. As a result, and combined with the auction-style IPO, my guess is that the stock will decline after it first starts trading. When the short-term investors don't see their huge gains materialize right away, they will sell, pushing the price down even further.

I'll be surprised if the price closes anywhere above the initial open. When so many people are looking for a big score, you can bet that's the one thing that's not going to happen.

georgeek




msg:1234074
 8:16 am on May 3, 2004 (gmt 0)

I'll be surprised if the price closes anywhere above the initial open. When so many people are looking for a big score, you can bet that's the one thing that's not going to happen.

Get ready to be surprised.

Although the process as outlined in the S-1 ensures that the distribution of shares will be made through the maximum number of shareholders the demand will still exceed the supply.

From the moment the shares are traded in the market the unsatisfied demand must be satisfied by those who have been allocated shares. Since there is a only a limited supply the price will rise. The only question is by how much.


EquityMind




msg:1234075
 12:57 pm on May 3, 2004 (gmt 0)

Also, remember, that $100.00 invested in Yahoo's IPO in 1996 would fetch $2,000.00 today (roughly). I have been getting so many calls from people who want to get in on Google's IPO, not because they feel they will profit on day one, but because they like the company or because 'it's sexy' and they plan on holding on to the stock like its a piece of history. Many feel that it would make excellent dinner party conversation to say 'I got in on Google's IPO, only because most assume that to acquire shares during this IPO would seem so impossible, so those that do would achieve a certain status, these aren't the type of people who are going to complain about dips in the near term, they'd rather hold on to their little stake and see what happens.

I think this is exactly the intention of Larry and Sergey, to reduce the institutional 'flip' of the shares on trading day and to have ownership from the public that loves them so much and believes in the company, hence the unusual nature of the offering. Now granted, I'm making these observations just from a random sampling of people that I know personally, but I get asked about advice on stocks quite a bit and this is perhaps the most interest in a single company that I have ever had inquiry on including from people who are not traditional investors but for some reason, want to be part of this one.

EquityMind

loanuniverse




msg:1234076
 1:00 pm on May 3, 2004 (gmt 0)

...Although the process as outlined in the S-1 ensures that the distribution of shares will be made through the maximum number of shareholders the demand will still exceed the supply....

Depends:

If the auction puts a limit on the number of shares per individual. Then yes, there will be unsatisfied demand.

If the auction sells all of the shares at the same price {similarly to how treasury auctions non-competitive bids work}. Then yes, the will be unsatisfied demand.

If however, the winning bids are solely based on the amount people are willing to pay without restrictions as to the amount {good oportunity for Bill Gates to buy a nice chunk}. Then no, the increase during the day will be limited mostly to those that did not get in the auction {a small number}

georgeek




msg:1234077
 1:41 pm on May 3, 2004 (gmt 0)

If the auction puts a limit on the number of shares per individual.

Yes, it is quite likely there will be a two limits. Firstly a limit on the maximum application which may be quite high (in the unlikely event that no maximum number is given large bidders will have to avoid disqualification on what the S-1 refers to as bids that have the potential to manipulate or disrupt the bidding process. Secondly a scaling down for large applications during the allotment process (referred to as pro rata allocation in the S-1).


wellzy




msg:1234078
 6:38 pm on May 3, 2004 (gmt 0)

Open: $25.00
Close: $52.00

;)

Sharky




msg:1234079
 4:39 am on May 4, 2004 (gmt 0)

In an ideal auction, everyone who is interested in buying the stock would register and place a bid for the maximum number of shares and maximum price they are willing to pay. The seller would then choose a price cut-off that produced the amount of desired revenue. Winning bidders would pay the price they bid and get all of the shares they bid for. Losing bidders would get no shares. If everyone bid the maximum they were willing to pay, everyone would be happy. There would be minimal un-met demand, and one would expect the result to be a minimum of volatility on the day after the auction (especially if the investors were all in it for the long-term).

Of course the auction will not be ideal. It will differ in many ways, including:

-- Not everyone who wants to buy the stock will register (People outside the US, for example, are excluded)
-- Not everyone who bids will bid the most they are willing to pay (anyone who has used eBay knows this)
-- Winning bidders aren't guaranteed that their allocation will match their bid (the rules for allocation as outlined in the S-1 are fuzzy at best)
-- Winning bidders pay the lowest price accepted, rather than the price they bid
-- Google can't choose what kind of investors they get. There will be tons of speculation and lots of people will be in it because they think they can make a quick buck
-- Google seems to be reserving the right to sell more shares, if they feel the demand is there. They might sell the shares during the IPO, or in the open market afterwards.

How will these differences effect the post-IPO market? There will definitely be some un-met demand. If I was willing to pay $100/share for 1000 shares, and the accepted price is $50/share, I might be willing to buy 5000 shares at that lower price. If I didn't get my full allocation, that would also leave me wanting more.

Some people will be uncomfortable with a sealed-bid auction. On eBay you can at least see what the last bidder is willing to pay. With a sealed bid, it's hard to know what a fair price really is, unless you can see the entire order book. The order books are visible on the open markets, so I'm surprised that Google and their underwriters have chosen to hide them for the auction. I would wager that an open order book would actually result in a higher net price than the planned closed one.

By opening up the IPO to more investors, I believe Google is inviting increased volatility. When you bring in the masses, that means lots of novice investors who don't have the stomach for market fluctuations.

Underwriters learned a lot from IPOs like Yahoo, Akamai and eBay. They left a ton of money on the table. It hurts the underwriters as much as the companies. Google is clearly making an effort to avoid that problem. If they do their job perfectly, the price at the end of the opening day will be at (or even slightly below) the opening price. We know they won't be perfect, but how close can they get?

What will happen when the unmet demand meets a flood of novice investors? I'll wager that the novices get creamed. Here's one possible scenario: the price goes up at the open while public orders get filled. About a half-hour after the open, it's up by 6%. Then it starts moving down with some early profit-taking. On the first sign of weakness, more experienced investors begin to sell short into the dip to help it move. The goal is to wash out the novices who don't have the stomach to ride it out. There aren't too many novices who can handle seeing the price tumble by 20%+, especially when they thought for sure that they were going to double their money. After moving down a few percent, some novices get nervous that the price is rising meteorically, and begin selling, creating a snowball effect. After a frenzied 3-hour decline, the price starts to recover, and the more experienced investors first cover their shorts and then begin to buy. After dipping down by 20%, the stock closes the day up 2%.

Does it make sense that it would be possible to get a bargain when the auction is open to everyone? The reasons past so many past IPOs went crazy were typically extremely poor pricing and artificially-induced scarcity. Neither of those factors seem to be at work here.

But hey, if you guys want to buy it that way, please do! I'll be waiting for you to sell to me at the bottom of that first big dip.

kellyandsummer




msg:1234080
 8:33 am on May 4, 2004 (gmt 0)

It would be nice if someone explained how exactly one would be able to participate in the auction....

georgeek




msg:1234081
 9:36 am on May 4, 2004 (gmt 0)

Here's one possible scenario: the price goes up at the open while public orders get filled. About a half-hour after the open, it's up by 6%. Then it starts moving down with some early profit-taking. On the first sign of weakness, more experienced investors begin to sell short into the dip to help it move. The goal is to wash out the novices who don't have the stomach to ride it out. There aren't too many novices who can handle seeing the price tumble by 20%+, especially when they thought for sure that they were going to double their money. After moving down a few percent, some novices get nervous that the price is rising meteorically, and begin selling, creating a snowball effect. After a frenzied 3-hour decline, the price starts to recover, and the more experienced investors first cover their shorts and then begin to buy. After dipping down by 20%, the stock closes the day up 2%.

I think you mean impossible scenario :)

Have you ever tried to short in the first few days of an IPO? It is virtually impossible most times either because it is specifically prohibited for the first few days on a particular exchange or brokers have not got their 'book' together to borrow the shares which enable a short to be transacted.

There are probably an infinite number of possible scenarios but yours isn't one of them sorry to say :)


It would be nice if someone explained how exactly one would be able to participate in the auction....

Apart from what is in the S-1 Filing [sec.gov] there is no other information and we will all have to wait for further details to be made public.

Sharky




msg:1234082
 6:53 am on May 6, 2004 (gmt 0)

The selling doesn't have to be the result of shorts. It can also be just plain selling. Large investors have been known to sell for the purpose of depressing the price, only to buy back even more than they sold after shaking out the weaker players.

On the other hand, short selling on IPO opening day happens all the time. The SEC prohibits the underwriting syndicate from lending shares for short selling for 30 days after the IPO. However, other brokerage firms and insitutional investors are not under those restrictions, and they will occassionally be willing to lend shares for short sales. Also, market makers and others on the floor are not subject to the same short-selling rules as the rest of us -- it's an easy thing for them to short, especially when they know the short will be covered before the close.

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