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Someone has to say it, might as well be me: If you wanted to do everything you could to kill the Google deal, if you wanted to do everything you could to be sure that you generated the worst deal ever, you would do exactly what Google's done. Let me count the ways.
First, you buck the system, which had finally gotten a lot of the kinks out of it, and make sure that the thing's done Dutch. I know the bonds are used to Dutch auctions, but the unsophisticated public sure isn't. Start the Dutch revolution without me.
Second, you set the price at a level that is the most forbidding to the most people: north of $100. What the heck does that prove? That you intend to be the next Berkshire Hathaway?
Third, you talk about shareholder democracy but then you do the single most anti-democratic thing possible: issue two classes of stock.
Fourth, you wait until the dog days of summer to do the deal when no one's around anyway.
Fifth, you show total contempt for all of the institutions that, like it or not, represent most of the buyers out there, especially now that you price the deal at $100 a share.
Full Article [biz.yahoo.com]
Google explicitly warns those seeking a quick buck not to bother: "We caution you not to submit a bid in the auction process for our offering unless you are willing to take the risk that our stock price could decline significantly."
I think that says it all. Even G is saying that you should stay away from the IPO.
This could go 2 ways people could lose money because the IPO is the highest the stock ever goes or everbody stays away from it and it goes $50. Then everybody gets into it and it does what they were trying to avoid.
It really sounds like they are trying to hurt the little guy more than help. It's like they have a fish tank and are dumping the entire can of fish food in. It may be some sort of sadistict form of entertainment. Lets see if these boneheads will bid it up to $200. That is what they are doing with AW. Nothing new with G.
Thus far the envidence is not very encouraging. The two co-founders are selling $100 million worth of stock each. Do they need the money? Most likely not. So why are they cashing out by such a large dollar amount? Some might argue that it is only a small part of their total portfolio but let's face is, rest is just paper money and next year could be worthless. Moreover, if they tried to sell all their holdings nobody is going to buy the stock and it will be a scandal.
This reminds me of a Seattle-based company that was claiming to become bigger than Microsoft. Individual investors bought in, he continued selling his holdings in small chucks of about $50-100 million each time explaining that it was on the urging of his financial advisor to diversify. I knew one trader who warned others against this company; most fans of that company turned against him and verbally abused him. Anyway, that CEO made to the worst CEO list of Fortune or some similar magazine later and recently I got a letter from a class action securities lawyer regarding this company.
I think Google's model is much sounder but if the insiders are so desparate to sell their holdings I can't help but wonder why. Moreover, once the co-founders have $100 million in their pockets, I wonder how much motivation will remain in them to do better since the utility of $5 billion is not much higher than the utility of $100 million - both will pretty much buy you almsot everything.
I won't be buying Google stock on opening day, I'll be buying Microsoft stock. MSFT is going to take a slight hit when Google opens (I have already talked to some MSFT shareholders who will be trading some Microsoft for Google and they don't seem to think they're alone in that decision - that will cause MSFT to drop) but it will recover when the Google boom is over. Want to make money off of Google's IPO? Buy Microsoft.
**DISCLAIMER: Not responsible if I'm wrong. heh.