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So what would it do with the money if it launches an initial public offering? See "Buzz grows about Google IPO."
A comfortable cash cushion would help as it competes with larger and better-funded rivals like Yahoo (YHOO: news, chart, profile) and Microsoft (MSFT: news, chart, profile) in the portal business and as it finds itself increasingly targeting the same advertisers as EBay (EBAY: news, chart, profile) or even USA Interactive (USAI: news, chart, profile).
Many observers believe Yahoo might buy Google's top rival in the paid-search business, Overture (OVER: news, chart, profile). Or that Microsoft might merge with LookSmart (LOOK: news, chart, profile), one of its longstanding partners.
Full Article [cbs.marketwatch.com]
"Once public, Google would face the pressure of quarterly profit reports, disclosure of information that may benefit competitors, and meeting corporate governance guidelines."
I can't imagine the folks at the Googleplex find this very appealing. I can't help but think Martha Stewart's wishing she'd never heard of an IPO.
Google doesn't have to go public for the insiders to do well. However, it certainly looks like they will be going that route. This is the time to do it IMHO. People are starting to get back into the market and there are plenty of people aching to try a good IPO.
IPOs will not be like they were before - and in this regard - there is a much greater chance people will not make instant profits. Businesses have wised up and realize that if their stock goes from $10 to $20 in the first day - that they got ripped off - and got half as much as they should have.
Some of this demand - however - wasn't part of the stocks FMV and rather a part of the IPO market that will no longer exist when Google goes public.
ChrisR - I disagree with you here. It's well known that companies IPO a small percentage of their stock at a big discount to whet the appetite of investors. The idea being that when the owners come back in 2 years for the big float everyone will have made a nice profit on their stock and will be ready for more.
>>Once public, Google would face the pressure of quarterly profit reports, disclosure of information that may benefit competitors, and meeting corporate governance guidelines
I dunno. Google seems greedier every day. They've certainly changed their mindset from focussing on search to focussing on profits already. I doubt whether an IPO would make a big difference now.
It's well known that companies IPO a small percentage of their stock at a big discount to whet the appetite of investors. The idea being that when the owners come back in 2 years for the big float everyone will have made a nice profit on their stock and will be ready for more.
If the copmpany gets close to FMV for the shares - they wouldn't in many cases have to make a second offering - which would lower the value of the initial shares. I can't see this being in the companies interest.
People do want a discount, because they are taking on more risk - or were in the tech bubble. Companies like google have some sort of track record and actually make a profit. I think this discount can be more easily figured into the price.
Then there are the big wall street scams that hopefully won't occur today with IPOs - where CEOs of big companies were basically bribed with IPO allocations:
I don't think this benefits anyone, but the CEOs of the companies that threw their business that way.
This article is three years old, but it makes a case for some of the things you are saying:
I can see some of the benefits you [and the article] are talking about, but billions is a lot to lose for good will and potential future gain and I think they can do it with a much smaller discount. As long as I can get my shares for google cheap - I'll be happy :)
Isn't the idea to get over fair market value?
Sell 10% today at 50% discount. Lose 5% of the market value of the company. Shares surge almost straight away. Gain great goodwill.
Sell another 80% in 2 years at a 30% premium. Earn 24% on top of the company's true market value. Shares drift downwards. Hey - you can always blame the market ;)
The owners retain 10% to show their "interest" in the company, but are already on their way to the Bahamas.
Eric Schmidt: <gives up, head in hands>
LOL .. I think Google should go IPO and buidd a warchest of cash to get that extra cushion for bad times:)
Sell another 80% in 2 years
I don't think it works like that - you would be diluting the shares 8 to 1.
Lets say - for the sake of math - google has a FMV of $10,000,000.
Lets say there are a million shares - again for the sake of making it easy to do the math. Each share has a FMV of $10.00.
If you put 10% of the shares (100,000) on the market at a 50% discount $5.00 - sure - I can buy the value might go up to $10.00 right away - for that is the FMV. It may trade at more or less depending on how greedy the market is. Google would pocket $500,000 after fees.
Then lets say you want to sell another (800,000 shares) - The supply is going to be much higher. You aren't going to automatically get 8 times as many buyers. Where would these come from? If people wanted google shares - they would have bought them at $5 - $10. You can't INCREASE supply and get a higher price - the market doesn't work that way. Stock buy backs are considered a GOOD thing, selling more stock would never - in and of itself drive the price up.
The pundits on CNBC last week or so were saying microsoft stock was weak, because there was a "rumor" that someone was going to unload a lot of MSFT. That someone turned out to be Steve Ballmer, but he only sold a small portion of his stock - still a lot of money.
Not everyone will cash out - plenty of execs love their company and still own a ton of stock.
Ted Waitt still own 33% of gateway - now valued at $4.00 down from a high of $70.00+.
Michael Dell owns 12% of dell
Pierre Omidyar owns 21% of ebay
Jeff Bezos owns 25% of amazon
Bill Gates owns abot 10% of microsoft
There is no need for rapid selling by insiders. They will have a paper profit if the market goes up - PLUS an inside perspective on the company. Sure - some people will sell their shares - a man has got to live - and everyone should diversify their holdings. Most people love what they do - bill gates does - isn't like he has to work - same with most other rich people. No one is going to want bail out of the possibly most popular internet company on earth.
If they believe in the company - it only makes sense for them to hold onto their shares - especially if they think they will go up. They can't just ask for a 30% premium (well they can try) if the stock is trading on the open market NO ONE is going to pay 30% more for shares anyone can buy on etrade for $20 (unless they are trying to take over the company).
You can be a focused motivated PhD - but you cannot ignore financial independance if its shouting at you every day at the stock exchange.
This was something that larry page (I think) mentioned. Only time will tell, but I don't think it is going to end up having that great of an effect. Stock options are what corrupt people and that is due to trying to cheat to make your earnings look better. I don't see that happening at google. They don't need to cheat to make money.
Well if Google ever does decide to go public, you can bet that some 95% of the users on this forums and others will be snatching up shares like crazy. Some for the money, and some just for the sheer bragging rights that they own a piece of Google. ;]
Hopefully they will have a pretty stock certificate you can buy from oneshare. I think the pixar one looks nice:
So why bother IPOing at all then? Might as well hold onto all the shares if you think the market will undervalue them (i.e. the price today will be significantly lower than a while from now).
>>They can't just ask for a 30% premium (well they can try) if the stock is trading on the open market NO ONE is going to pay 30% more for shares anyone can buy on etrade for $20 (unless they are trying to take over the company).
This seems to make sense, and you are right, but when a company is floated at near entirety the takeover factor comes into play and this can boost the shares. Don't forget also when they float the rest of the shares they will (for sure) do it with a twist, like new product development or partners, or just plain old new estimates of higher profits.