Googles IPO: The $30 Billion Question

    August 3, 2004

“If Google manages to pull off a well received IPO, how do you measure a well received IPO”? That’s a question posed by CBS Marketwatch lead reporter Bambi Francisco. Google has got to be Google in many ways by being the exception to the rule. As such, it shouldn’t come as a surprise to anyone that they follow suite with their IPO. Curiosities aside, are investors excited?

Google is planning an auction style IPO. In that style IPO, the theory is that all demand should be satisfied at the IPO price. Bambi explains that the possibility exists in an auction style IPO to lessen or diminish an aftermarket pop. She observes however that Google might be able to overcome a flat aftermarket as depending on the price of the stock and expected allocations by investors. In other words, Google is projected to go off between $108-135. If Google actually comes in somewhere in between, say $112 or so, investors that had allocated based on $135 might be tempted to buy more.

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Bambi also speculates that the herd mentality of Wall St. could kick in and we might see some relative impact across the industry. She reasons that “if Google is more expensive than Yahoo, and Yahoo is far more diversified than Google” there’s some reason to expect that investors will look to pick up stock like Yahoo in a bargain hunt.

One of the real concerns hanging over Google right now is the seasonality issue (see here). As Bambi observes, “it would be a real shame if Google reported its first public quarter and missed its numbers”. Investors are all too aware of this. Bambi polled her audience of small investors and asked the if they would be interested in buying Google valued at 32 billion – about 90% of the responses were no. There is obviously a high level of concern among bubble wary small investors. When asked if she would be excited about participating in Google’s IPO, Bambi explained that she can’t invest (she isn’t allowed to) but if goes on to say that “if I were to invest, I wouldn’t be that excited about jumping in, I’d probably wait til it settles. I’d probably wait til October”.

Mike is a manager at iEntry. He has been with iEntry since 2000.