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Google Cuts IPO Prices
Fischerlaender




msg:1233896
 8:07 am on Aug 18, 2004 (gmt 0)

According to some news here on german radio, Google has cut its price range and the new price range is now 85$ to 95$. Radio further said that there should be a statement concerning the price cut on Google's homepage, but I did not find any information.

 

IITian




msg:1233926
 5:41 pm on Aug 18, 2004 (gmt 0)

I think giving the range is misleading. It is something like suggested retail price. I am sure that if they gave the range as $10-$20 most investors would have bidded lower than what they did for the higher range. Google is playing a game to win and for the investors to lose.

They should have just given the EPS, sales, growth rates, market cap of rivals like Yahoo and then let the investors decide.

loanuniverse




msg:1233927
 5:48 pm on Aug 18, 2004 (gmt 0)

I disagree with the missleading part as the investor is the one deciding how much to bid and nobody said that you could not bid a lower price. In fact, a lot of people in the board did so, myself included.

IITian




msg:1233928
 5:57 pm on Aug 18, 2004 (gmt 0)

If you are told that the "experts" like Morgan Stanley think that it is worth $100-125 and this information has been passed on to all, and as a trader you want to bid so that you can be assured of some shares for trading, and you think that the actual intrinsic value is $10, how much would you bid?

$10 or something around $100?

In many cases people's percetion of value is influenced by 'experts" and most people will start thinking the value is around $100-$125 - somewhat lower maybe but not in the range of about $10.

Same goes with other things too. if a diamond has "appraised" value of 1 million dollar - how much would one bid to have a fair shot at getting that diamond? around half a million dollars or $10?

These guidance prices are to trick people into perceining these to have high value around the guided values and thus making them pay more than what they would do if not provided with such info.

Kirby




msg:1233929
 6:04 pm on Aug 18, 2004 (gmt 0)

>I thought the projected price was laughable when I first heard it, and $85-$95 is still worth a chuckle.

I still think this was a contingency planned for in advance. Set the value high and see what happens. Cut the price to a price still laughable and make it look like a discount.

Chris_R




msg:1233930
 6:09 pm on Aug 18, 2004 (gmt 0)

Anyone that doesn't understand that stock price is meaningless - shouldn't be bidding on the IPO.

Anyone that doesn't understand that you can bid whatever you want - or how a dutch auction works - shouldn't have bid.

None of this is complicated.

Even if you did bid wrong - you wouldn't pay more than the highest price all the shares could be sold at. I doubt that the small group of people that fall under this category would change the price much if at all.

I don't see what the big deal is - people don't like change? They don't like an auction?

The new price is IN LINE with analysts estimates. It corresponds almost exactly with the price Chndru brought to our attention in this post:

[webmasterworld.com...]

The fact that google was hoping for more is not suprising. There has been much talk about this IPO - and plenty of firms seemed to think it was possible.

Google will have saved millions of dollars in fees using this auction process which seems like a better way to allocate stocks to me. If google goes out of business - and the only thing they change is that process - I think it will have had a positive effect on the world of finance. That a few well connected people should be the only people to get in on an IPO - is not fair.

Google wanted to sell their share at $135 a piece - I wanted to buy them at 35 cents. We will meet somewhere in the middle.

BayAreaGuy




msg:1233931
 6:13 pm on Aug 18, 2004 (gmt 0)

I still think this was a contingency planned for in advance. Set the value high and see what happens. Cut the price to a price still laughable and make it look like a discount

However one slices and dices this IPO, this will be the most bizzare an IPO can ever get.

Lord Majestic




msg:1233932
 6:32 pm on Aug 18, 2004 (gmt 0)

Yahoo has a market cap of 38.16 Billion
Ask Jeeves has a market cap of 1.44 Billion

I think to say google is worth at least 16 times Ask Jeeves and at least 60% of what Yahoo is - isn't to far out of line.

Problem is - are Yahoo and AskJeeves really worth it? I don't think so, but it so happens that current stock holders are okay with it, for now.

This is wrong. Google INC is still selling the same amount of shares. Some of the stockholders are selling less shares - The shares being offered by google themselves is staying the same.

Technically correct, but I think they used "Google" as a collective word which would take into account all people who sold Google stock - investors, employees, Google itself etc.

jcoronella




msg:1233933
 6:44 pm on Aug 18, 2004 (gmt 0)

I am now a bit concerned that they lowered the price *AND* the number of shares offered. If they kept the same number of shares, the price would be even lower.

Those investors are still going to cash out, just not on day one. So with the market demand of $85-$95 with 5.5 million shares, what will it be when all 11.6 million are out there in a few months?

I would guess that the stock will plumet. The question is what does the supply and demand curve look like - if it has a slope of 1, then the stock is going to drop 50% within a few months - and I think that is optimistic.

Just lowered all my bids by over 50%.

Chris_R




msg:1233934
 7:02 pm on Aug 18, 2004 (gmt 0)

what will it be when all 11.6 million are out there in a few months?

There will be a lot more than 11.6 million shares. Google will have a total of 271 million shares.

These investors are not stupid - they won't dump their stock all at once.

Decreasing the amount of shares available on day one from 25.7 million to 19.6 million is not that big of a drop percentage wise when you take into account all the shares available.

skibum




msg:1233935
 7:03 pm on Aug 18, 2004 (gmt 0)

If the bad news keeps rolling in, maybe those $20-$30.00 bids will bring home some shares. Can't imagine anyone raised their bids after this news.

bobothecat




msg:1233936
 7:12 pm on Aug 18, 2004 (gmt 0)

Just call it a hunch, but my guess is that Google will cancel the IPO and try again later. Heck, they still haven't gotten the okay from the SEC...
[money.cnn.com...]

... and doubt they will.

added... okay, I'll eat crow. SEC just approved the IPO.

[edited by: bobothecat at 8:09 pm (utc) on Aug. 18, 2004]

Chris_R




msg:1233937
 7:14 pm on Aug 18, 2004 (gmt 0)

Can't imagine anyone raised their bids after this news.

I think some people will be seeing the 85 - 95 as converging more on the true price and also as what the bids seem to be showing. I think people that were willing to bid $120 for some shares may lower their bid, but those that were willing to pay $75.00 a share, might be willing to submit a bid for more as to not "miss out".

People should rely on their own valuation of the company in submitting their bids, but I see this as paring down the bids from both sides.

I don't think people that were bidding $75.00 will be as likely to lower their bids to $65.00 as people that were bidding $110 will be to lower theirs.

People that were bidding $75.00 were not really paying attention to the guidiance google was giving. They came up with their own valuation and submitted a bid.

People bidding in the previous range may have relied on google's estimates in the hopes to get some shares.

Just my 2 cents.

Xoc




msg:1233938
 7:18 pm on Aug 18, 2004 (gmt 0)

With the way a Dutch Auction is held, by cutting the number of shares, they have effectively increased the price that all the shares are sold at. Let's suppose that Google was only going to sell 10 shares by Dutch Auction. People A, B, C, D, E, and F put in bids:

A 3 shares @ $100
B 2 shares @ $90
C 4 shares @ $80
D 1 share @ $75
E 8 shares @ $60
F 9 shares @ $50

They start at the top and count down 10 shares, which arrives at D. So A, B, C, and D get shares at $75 a share. E and F get nothing.

Now if Google only offers 5 shares, then A and B get shares, but at $90 a share.

So by cutting the number of shares, they have effectively increased the price per share. The price would have been even lower if they had not cut the number of shares.

[edited by: Xoc at 7:22 pm (utc) on Aug. 18, 2004]

Chris_R




msg:1233939
 7:22 pm on Aug 18, 2004 (gmt 0)

Good point Xoc - etrade initially was requiring everyone to recertify their bids after the change in the number of shares available, but then changed their mind calling the change not material.

I think it is a material change as you point out, but think many people will redo their bids. I don't know if the two will cancel themselves out.

ggrot




msg:1233940
 7:40 pm on Aug 18, 2004 (gmt 0)

Xoc, yes - they've increased the price per share, but decreased the number of shares. That doesn't necessarily mean that the company will sell for more or less. If Google sells 10 shares at $75 thats $750. If they sell 5 shares @ $90, thats only $450. Meaning, that google made less money on the entire IPO and each investor that did get into the IPO came out further ahead (even if they paid more).

Think about it:
A: 3 shares @ $75 = 30%, or $2.50 per %1 of the company
A: 3 shares @ $90 = 60%, or $1.66 per %1 of the company.

If you stop thinking in terms of shares and start thinking in terms of percentage of total shares (or percentage of ownership in google), you realize that google is not making some clever math trick to come out ahead.

loanuniverse




msg:1233941
 8:03 pm on Aug 18, 2004 (gmt 0)

Xoc, I agree. The fact that the individual investors took some of their shares out will mean that the shares sold by the company will net Google more money.

Very good point.

Lord Majestic




msg:1233942
 10:06 pm on Aug 18, 2004 (gmt 0)

but those that were willing to pay $75.00 a share, might be willing to submit a bid for more as to not "miss out".

IMO one has got to be either with too much money or totally crazy to buy into company with P/E ratio higher than average human being's life span!

Kirby




msg:1233943
 10:20 pm on Aug 18, 2004 (gmt 0)

>I think people that were willing to bid $120 for some shares may lower their bid, but those that were willing to pay $75.00 a share, might be willing to submit a bid for more as to not "miss out".

No doubt. But Im still betting this is overvalued. How many IPOs where the stock is worth more now than when they went public?Why would Google buck this stat?

Hunter




msg:1233944
 10:24 pm on Aug 18, 2004 (gmt 0)

I think it will come out between $80 - $90. I say stay away for a while, give the hype a little time to find reality, decide your price and stick to it.

plumsauce




msg:1233945
 3:18 am on Aug 19, 2004 (gmt 0)


The reduction in the number of shares on offer with the effect of raising the settlement price borders on being fraudulent. It certainly is a material change despite etrade's opinion. Therefore, the right of recission applying to initial public stock offerings is open to all bidders.

I can see the shorts all over this one. Widely held=lots of float to borrow from.

Xoc




msg:1233946
 3:31 am on Aug 19, 2004 (gmt 0)

ggrot-

You have to realize that the publically traded shares are not all of the shares in the company, just the number that is being publically traded at the IPO. There are other shares that are held by employees and the company that are not going into the IPO. So without other information, you cannot calculate what percentage of the company the winning bidders are taking. I think, most likely, they wind up with the about same percentage regardless of the price and number of shares issued.

The other shares can come on the market at almost any time for the current price. So while Google will reap fewer total dollars now, they still have the shares that they haven't issued and can issue the additional shares at any time in the future. If the price doesn't tank, they could still make more dollars by issuing the other shares in the near future, having propped the price up by cutting the number of shares at the IPO.

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