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Google Inc. of Mountain View will structure its
much-anticipated initial public offering of stock in a way that will give an unusually broad range of investors a chance to compete for some of its IPO shares, according to an investment banker familiar with the company's plans.
"Economists have forecasted 9 out of the last 5 recessions."
Google never has been conventional.
I think Brett's point may be that the forces that impact Google's value might, to a large degree, start becoming outside of Google's control for the first time.
That is to say, it's not how smart G is or isn't any more, but if G is the where things are bought and sold via the web to a large degree (see Bambi's column where a case is made for that), the economic forces become a factor. Which is to say, Google becomes conventional at least in that the same forces that affect you and I and our neighbors will also impact Google.
Therefore, the question on the value of Google is: Is the internet's growth or potential starting to peak?
One sign that it is: Google is doing an IPO.
Whatever the price i may grab say 100 shares just for the heck of it - may order a physical share certificate and frame it as a personal collection ...afterall google have made a small fortune for many of us :)
So what exactly does Google need the banks for? Can somebody explain please?
An IPO is complicated, even for someone with as wide an appeal as Google. One of the main factors, though, will be that google will need an intermediary just to handle all the money. Literally. You don't just move hundreds of millions around at the flick of a switch, despite what some bad Hollywood might indicate.
Am I the only person left on the planet too cautious to buy into a tech IPO?
I like google, as a search engine, and as a convenient way to place some ads. But as a company I'd invest in? Not even with someone else's money. Here's a brief list why:
I can understand why companies are big on secrecy, but I would never invest in a company that's as shrouded as Google. Earnings/Margin just aren't enough info to go on. Those numbers are way too easy to tinker with and obscure (Enron anyone?) I wanna know nuts and bolts. How much real-estate they own, (or do they lease office space?) How many employees? What's their average capital outlay on equipment for the last 5 years? How much of that outlay is in technology that depreciates in the real world faster than it does on your tax returns? I could go on for days here on vital info that Google just isn't sharing with the outside world.
Image can make or break a company. Managing your corporate image is a fine art. And without discussing the wisdom or lack thereof of some of Google's recent moves (Gmail, arbitrary changes to AdWords, etc), these were moves that were bound to be controversial. Controversial going into an IPO is not where any company wants to be. You want to be carefully styling your established image, keeping your known strengths right at the front of everyone's mind. Google, as a corporation, just doesn't grasp this, and it shows a fundamental lack of understanding of how corporate image is used and managed. Again, this just cranks up the risk factor.
Google is God, but so was Zeus, once...
And tech is a lot more mobile than religion. M$ is moving into search, Yahoo is refining their search strategy, AOL is tinkering with their search again, and even lowering some of its "garden walls" to allow outside netizens into some of the closed world that was once only available to the anointed paying members of AOL. Niche engines for scientific research are gaining ground, other "older" players in the search game are consolodating, merging technologies, and retrenching. In a landscape that can change as fast as the net, is Google going to be king of the hill forever? And even if they do remain the "dominant" search engine, they can still lose an increasing chunk of the market to an ever growing range of competitors.
There's too much tech Venture Capital, and not enough solid Tech to buy into.
In economic terms, this is known as "overhang," and its a very serious factor in the tech industry right now. One of the hold-overs from the bubble burst, is that there are a bunch of venture capital firms left out there with BILLIONS of dollars total in their funds, and not a whole lot of places to put it. Something like Google comes along, and all of the sudden they have some place to put it that their fund investors aren't likely to complain about. Also, just with the general hype around Google, there are a LOT of people out there looking to buy in right off the bat, and this could easily drive the price of the stock way past any proportion to the actual value of the company.
And there's more reasons out there why I'm not in the rush to sign up for Google stocks. Is there a chance I'll be kicking myself in a few years for not getting in on this? Of course there is. But my inner conservative rebels against the thought of putting money into any company with the above listed (potential) liabilities.
Nice points. I'd just like to add to those a little.
- There is no need for Google to seek out investors with hundreds of millions of dollars. If they go for wide-held ownership (say 1 million investors), the average holding might be 10,000 to 20,000 dollars. I see no reason why this needs to be handled by an investment bank. Typically the bank fees for an IPO for a firm Google's size can run into hundreds of millions of dollars. Most of that money is paid for the book-building process (finding investors), and underwriting (insuring) the IPO. I see no reason Google needs either of those services since the IPO is a sure-fire success.
- Secrecy: I would not be too concerned about the realestate and tangible assets Google owns. If you are coughing up 18 billion for the company, what can the assets be worth? A few hundred million tops. 95% of Google's value is intangible, and as you point out very well in your following arguments, that value is questionable.
For anyone looking to invest in this IPO, read grelmar's post, think about what he says, and then if you're still convinced, go write your checks. The people at the Googleplex are the current stockmarket flavour of the month - they know that, their investment bankers have confirmed that and they're no fools. Just like car dealers marking up their soft-top sportscars in the spring, G has been told the time is right to maximise their share price.
For me, property is still a better investment. I'm not saying that you won't make money, but I am saying that there are safer, less bumpy rides available for those with spare cash to invest.
Googles future growth (even 5 years worth) is irrelevant if the share price starts artificially inflated because the growth is already accounted for in the share price.
My previous prediction:
I will be able to retire on the back of the share price rises in tech stocks.
Still working for a living ;-)
So prediction 1 might not happen. Do bears.....?
> investment banker ... naive comments...
What were your opinions of the niave comments made by investment bankers back in 99? Just wondering.
Iraq in relation to Google IPO:
I think Brett was using it to draw parallels to the early 1970's, along with all the other economic indicators.
Property a better investment:
In the UK - can anyone spell bubble?
hmmm. Yes. Well...
Actually most of the comments are pretty much on a par with the investo-babble you can read from the professionals in the average investment magazine. All that is missing is P/E ratios and discounted cash flow guestimates.
In my opinion investment bankers and financial commentators over estimate their importance and their knowledge of financial markets. In fact most professional commentators cannot even agree on where the market will be in 12 months. I am often amused when I read their theory-du-jour.
So, to add another naiive idea: I'd love to see Google launch an internet auction for their shares, for settlement in e-cash only :) - especially if it was GoogleCash and they maintaned the secondary market on the net after the launch.
So yeah, I guess you guys are as likely as any person or monkey to get this right :)
p.s. Not having a moan here, but I would have to put my hand up and say that we've let this thread wander just slightly off topic!