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Will Google's Auction Change Future IPOs?

 8:42 pm on Aug 19, 2004 (gmt 0)

The auction is done, the stock is live, and those who purchased IPO shares are up more than 15%. Despite all the last minute flubs, I think the auction has to be considered a success. This outcome is far better than if the stock had issued at the initial overheated estimates and then tanked.

A day ago, the doomsayers were claiming that Google's auction was such a fiasco that it would set the idea back for years, and that respectable IPOs would shun auctions in favor of the traditional investment banker approach.

Now, though, I'm cautiously optimistic that the outcome was a more-or-less fairly priced stock (for investors that believe in Google's prospects), and that the auction approach may not be as badly tarnished as the pundits predicted. Opinions?



 8:58 pm on Aug 19, 2004 (gmt 0)

I will call it a success and a much better system than the traditional onces.

Glitches were there but to the credit of the company they finally priced it so that the initial bidders - many of them potential long-term investors - got some reward for taking on extra risk.

I hope other companies come up with similar plans.

christopher w

 9:25 pm on Aug 19, 2004 (gmt 0)

Unlikely - Google had a tremendous advantage in being a hot company in a dead market who could pretty much write their own ticket.


 12:08 am on Aug 20, 2004 (gmt 0)

One way to pose this question is .. who is unhappy with how it all worked out?

a) people who didn't participate in the dutch auction
b) investment bankers..

I think these answers indicate that it was a success.


 1:44 am on Aug 20, 2004 (gmt 0)

The answer is fat NO.

It will change NOTHING.

Google could do it because the company is in the face of 200 million people everyday .. Not an easy feat for any other.


 4:32 am on Aug 20, 2004 (gmt 0)

>Google could do it because the company is in the face of 200 million people everyday .. Not an easy feat for any other.

It is true that Google is one of the best-known brands around. I wonder why it needed dozens of underwriters from the Wall Street, a place it does not seem to have respect for. Couldn't it do it on its own? Selling 20 million shares throughout the world would have taken it a few hours in all at most. Just show the link to IPO on top of your search page and you are all done. Why so many WS firms, roadshows, interviews and other nonsense much lesser companies have to go through?

My feeling is that Google wants to develop good relations with investment firms because in future and even now it needs its services.


 5:06 am on Aug 20, 2004 (gmt 0)

Wallstreet is changing.

Ever wonder why they still have people in the pits yelling and screaming? Ever wonder why they don't use COMPUTERS?

Ok - they do - but there is really no need for those people. Despite what the specialists will have you believe. Any company on NASDAQ for example, doesn't need them - so why on the NYSE? Becuase they can - it iis an old tradition - one that dies hard.

It may take years before Dutch Auctions are common place, but it is progress. The reason they needed all those underwriters - is they needed a market for their stocks - you had to have an account with one of them.

In the future - hopefully this won't be the case.

Auctions are the fairest way to distribute shares. There could be improvements made to the process, but it is better for the companies and for investors. The only two parties that matter in such a transaction.


 1:51 pm on Aug 20, 2004 (gmt 0)

I'm cautiously optimistic that the favorable outcome will add some credibility to the auction concept. WR Hambrecht, the major early proponent of the auction IPO, had done only a handful of them since their launch a few years ago. I expect this to change.

To my mind, the big beneficiaries of the auction IPO approach are smaller firms. Google had every possible option available in their process; on the other hand, smaller companies can't get investment bankers to return their phone calls. And, if a small firm is successful in getting an investment banker willing to handle an IPO, the costs (as a percentage of proceeds) are very high.

In fact, a quick review of auction IPO activity at Hambrecht suggests that the acceleration is already occurring. Three offerings concluded in July, and another three (including Google) will have closed by the end of this month. These deals are all pretty large - nothing below $20 million, and many in 9 figures. I'd hope that as the process becomes more established that smaller companies will find a market, too; the legal and accounting costs of being public are high, but some small firms have good reasons to go that route.


 2:44 pm on Aug 20, 2004 (gmt 0)

Having been a user of discount brokers all of my investing life, I hope that the process does take hold and I get the opportunity to get in at this stage of the game.

Not sure if it will change in the inmediate future, but it is a big step on that direction.


 7:27 pm on Aug 20, 2004 (gmt 0)

Yeah, the whole idea of favored investors getting first crack at hot IPOs is pretty archaic, almost like mobs of brokers yelling at each other to trade stocks.

It would be ironic if eventually Google is remembered more for revolutionizing investment banking instead of web search. ;)


 11:13 pm on Aug 20, 2004 (gmt 0)

Since Google has already gone through the trouble to develop the web auctioning interface, maybe they will patent it, put a "IPO" tab up on the home page and start a new branch of business... online IPO web business :)

I would if I were them. Get good exposure through google.com for all upcoming IPO's... investors could search ipo.google.com by industry type or estimated bid price or whatever and bid accordingly.


 11:43 pm on Aug 20, 2004 (gmt 0)

online IPO web business :)

One of the best ideas I have ever read..... This would have to be done in partnership with an established investment bank, and you could probably get most online discount brokers to jump in.

I will get Googleguy to start working on this right away... technically I am his boss now.


 7:31 am on Aug 21, 2004 (gmt 0)

It would bring HUGE exposure to small businesses looking for investors, bring in more money then they normally would get, etc. I would think people would be lining up to use Google's already PROVEN multi-billion dollar IPO auction money making system.

Just remember you heard it here first, i'm sure the google guys are already hard at work...

Once its fully operational, i'll put a donate paypal link up on my homepage and i will be expecting a nice little bonus :D

I don't think the question is will google's auction change future IPO's but will google change the future of IPO auctions, and I think they will :)

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