Why Wall Street Wants Google to Fail 336
Sam writes "The most anticipated initial public offering in years threatens to derail a cherished gravy train, where underpriced shares are handed out to favored investors and grateful CEOs."
This discussion has been archived.
No new comments can be posted.
Why Wall Street Wants Google to Fail
Related Links Top of the: day, week, month.
BLISS is ignorance.
Wall street getting upset because the little (Score:5, Funny)
*BOOM* Damnit, there goes my sarcasm detector again.....
Re:Wall street getting upset because the little (Score:2)
Shot at what? Buying shares of a company that will be worth 33 billion $ at the current valuation?
Re:Wall street getting upset because the little (Score:3, Informative)
Re:Wall street getting upset because the little (Score:3, Insightful)
Insteadm wait a few months for the price to come down to the $70 you originally quoted!
For once the market is allowed to drive IPO prices as opposed to some Wall Street Corporation.
Re:Wall street getting upset because the little (Score:4, Interesting)
Because... (Score:5, Insightful)
Re:Because... (Score:5, Insightful)
Re:Because... (Score:4, Informative)
This is still Google attempting to make money from an IPO, but that's nothing new, why should The Oracle not make a little green to keep offering it's top notch services?? However, it seems to be Google is doing everything they can to get feedback from actual users (or at least actual investors), and is keeping toadying by the big investment banks to a minimum...
The end goal here is not cheaper shares... the major goal is a fair share price decided by the investors rather than an undervalued share price decided by bankers looking to curry favour with other big companies and line their own pockets (for doing nothing really...)
Although I'm sure I've missed the point entirely... I hate $$$... hehehe
Re:you don't understand the IPO (Score:5, Insightful)
When you buy shares of Google, you'd really like Google to get that capital. When you purchase shares of google, you are now an owner in google. It's now in your best interest to be sure that google win's the tug of war between who gets the money. Because it'll maximize google's value.
This isn't so true if you're a speculative buyer who things that Google's price is going to jump up, and if you can just get your hands on it, to turn it over days later while it's on the way up. Then your on the wall street side, and you'd like to see them win.
So yes, depending on the type of investor you are, you have a vested interest in seeing one of the two of them win.
Hopefully, the price won't be the result of playing the games with supply and demand, and the psychology game that happens on Wall Street. There shouldn't be a sky-rocketing value, that if you can get your hands on it, in the first 3 days, and sell hours later a huge profit can be turned.
Liquid markets with stable pricing is good for everyone in the long term. Wall Street's problem is that if your plan isn't going to make money for Wall Street in the short term, they aren't interested. Short sightedness will be the financial ruin of this country if we continue to do things to maximize value in the short run to the detriminte of the value in the long run.
Kirby
Re:you don't understand the IPO (Score:3, Informative)
Bonds give you no authority (in Google's case, that's relatively true anyway). Bonds are also a lot less likely to make any big money for the investors. They'd be a lot better off to privately finance the thing thru a bank. A bond is nothing more then a loan with terms set in a bond where the debt is something you can sell.
There's in theory, low risk, and low rewa
Stock prices (Score:3, Insightful)
The Google IPO avoids government corruption. (Score:4, Informative)
The "stock market" is heavily involved in deliberate government corruption.
The Bush administration has been appointing heads of government agencies who reduce the role of those agencies. After they destroy the effectiveness of the agencies, they go back to running their businesses, and the corruption gives them more profit.
Another way they corrupt government is to starve the agencies of operating funds.
For a discussion of starving the SEC (U.S. Securities and Exchange Commission, regulates the stock exchange), see this article: Keeping the SEC on a Starvation Diet [scu.edu]. The corrupters don't want their stock manipulations discovered. They want more of this: Enron fraud [enronfraud.com], this: WorldCom fraud [worldcomstockfraud.com] and this: Tyco fraud [edgarsnyder.com].
This is all part of extremely widespread corruption in the U.S. government. Even the 3 movies and 34 books linked in this article are not enough to tell the story: Unprecedented Corruption: A guide to conflict of interest in the U.S. government [futurepower.org].
They are corrupting the IRS (U.S. Internal Revenue Service, collects taxes), too. The corrupters definitely do NOT want their tax returns to be audited, so they arrange that there is not enough money for audits: Bush Request for IRS Not Enough, Report Says [washingtonpost.com]
They are corrupting the patent office the same way. That's why there are so many crazy patents.
^ +5 Interesting (Score:2)
Interesting links.
Re:The Google IPO avoids government corruption. (Score:3, Informative)
It's just like the S&L scandal of the 80's. [google.com]
Re:Stock prices (Score:5, Insightful)
Re:Stock prices (Score:2)
Google's secret plan to dominate Wall Street (Score:5, Interesting)
1. Lots of public information (stock charts, news and webpages primarily)
2. Lots of private information (what users are search/researching)
3. Lots of computer scientists and programmers good at working with lots of data
4. Tons of computer power
You combine these elements, and you have a group of people that might be able to make sense of some of the chaos in the financial markets. They could get RICH! Fear the Google.
Mod parent up! AC has a point! (Score:5, Interesting)
Re:Mod thread down! Offtopic (Score:2, Insightful)
Re:Mod parent up! AC has a point! (Score:2, Insightful)
*ducks behind a bush, but peers over to watch what happens*
Re:Mod parent up! AC has a point! (Score:4, Interesting)
Than what have I been studying for the last 4 years?
Seriouslly: Economics *IS* a science. The only problem lies in the fact, that it is more of a social science (like sociology, philosophy) than a fact-based science (mathemathics, physics...). Saying economics is not a science is like saying pyhiatry is not a science.
Economics is a science that tries to determine how people will act based on the previous emphirical data. That's why you'll get 7 different answers if you ask 7 different economists for a forcast.
Social sciences are not sciences (Score:2, Interesting)
The fact that members of the social "sciences" go around using the word "science" is a marketing ploy and nothing else. These folks are hoping that their audience will miss the point : that the cornerstone of modern science is its ability to accurately predict based on theories. If a scientist predicts event E and based on theory T and E happens once for one set of input, and for the same set of input to T, event F happens another time, the scientific community will acknowledge that the theory T is broken.
Re:Social sciences are not sciences (Score:5, Interesting)
Perhaps the problem in realizing it's a science for some people is how it's taught in high school and undergraduate classes. Just think back to your major/PhD/whatever. People just generally aren't sophisticated enough, or have the correct tools, or whatever to deal with learning the whole theory in HS or even undergrad. Thus, simplifications are made, and those theories are just put forward almost as axioms. Once you get to the fore, you see that it is indeed a science.
I know; I'm starting research in Economics as a PhD student now, and leaving out the details, I am looking at data, formulating a theory for how people behave, seeing if it fits the data I'm looking at, then looking at other data/situations to see if my theory predicts that data correctly. If that isn't science, I don't know what is (and I have spent time in Physics. Sure, the math is more complicated, but the process is no different).
Now, I'm talking about Economics, not all the other social sciences. I have a feeling it may be true there as well. But to continue to call Economics not a science is either ignorant or egotistical. But of course, there aren't big egos in the IT/Science community.
Oh, well, I do see the comments attacking the fact Economics is a science get +5, but the comments pointing out the fallacy are still stuck low. So, guess there is a little ego out there. One line attack gets +5 Informative, and a thought out rebuttal is stuck at 1 or 2. You should really try to be unbiased...
Re:Mod parent up! AC has a point! (Score:5, Informative)
Re:Mod parent up! AC has a point! (Score:2)
Bah, Yahoo Finance far more useful (Score:2)
Little guy still has little shot (Score:5, Informative)
Most of the brokerages that will be offering this to the "public" still require substanital assets in the account, most with a 100,000 dollar min.
Little guys HAVE NO shot, and here's why... (Score:2, Interesting)
Re:Little guys HAVE NO shot, and here's why... (Score:3, Interesting)
But wait, this is a Dutch auction. Currect me if I'm wrong, but while $100+ may be a suggested price, but you can bid at whatever you want.
2) If you don't think the company management will be sufficiently accountable, then bid low. It's an auction, and the shares are only worth $100 each if enough people want to pay that much.
You don't want t
Putting your money where your mouth is. (Score:4, Interesting)
2) This is how they intend to keep their "Don't be evil" policy in spite of Wall St. demands. It may seem to devalue the stock in some sense (e.g. what am I buying really?) but frankly, I don't *want* Google to sell out.
3) Again, you don't have to buy it the second it comes out. You don't have to be first. If you expect the market to adjust it downwards, buy it then. OTOH, if enough people expect this, then there may well be more of an upside to it than was expected...
4) All stocks are a gamble. Right now, Google has quite a premium on it's Adwords, but they are, hands down, pretty much the BEST internet advertising there is to be had (save maybe slashvertisements...).
Now there are dangers to Google--the nonsense about trademarks & people using them as Adwords is one worry. Another is that Microsoft will use their monopoly power to force their crappy, slapdash search engine upon us all. Competition is a worry in any market. I don't know what they can do, but I know that Google can compete and I know that they can turn out a superior product.
Frankly, I want some of the stock to put my money where my mouth is--as a vote of confidence in Google--and I'd be the type to hold it long term, rather than cashing out whenever things look bad. None of us have any way of knowing how things will turn out. Microsoft or trademark law may well spell doom for Google. Conversely, they may manage to embed enough Google in windows through programs like the Google toolbar to resist even Microsoft's efforts to eradicate them. I mean, 'google' is already a verb, I don't put standing up to Microsoft past them at all.
Re:Little guys HAVE NO shot, and here's why... (Score:3, Interesting)
2) Great! You obviously don't know that most media companies are structured this way. I trust those guys more than I do Bill Gates, Ted Turner, or Jeff Immelt, so I have no problems.
3) No one said Dutch auctions were new. As well, the auction process that Google chose was the lowest price tha
Re:Little guys HAVE NO shot, and here's why... (Score:3, Interesting)
If you don't win the auction, take comfort that you aren't one of the suckers that loses his or her shirt (assuming that the P/E of 100 isn't vindicated).
Also, keep watch on the stock price afterwards. If the stock comes down to an acceptable level, you've got a buying opportunity.
Oh, poor underwriters, cry me a river (Score:5, Informative)
All very nice, reputable people [uow.edu.au] who really don't deserve to be treated like shit. I mean, they'd never to that to anybody themselves would they?
Re:Oh, poor underwriters, cry me a river (Score:5, Informative)
Inside Frank Quattrone's Money Machine [businessweek.com]
Nobody knew it at the time, but the apex of the Internet rocket ride came on the morning of Dec. 9, 1999. Executives of computer maker VA Linux Systems Inc. gathered at 6 a.m. in the trading offices of Credit Suisse First Boston (CSR ) on the 17th floor of a San Francisco skyscraper for the company's initial public offering. Among those assembled were Larry M. Augustin, the chief executive, and his friend Linus Torvalds, the inventor of the Linux operating system, who was dressed in his customary T-shirt and sandals. Their three toddlers scampered around underfoot while the adults watched in stunned silence as the stock price jumped from 30 a share to more than 200 within minutes. Augustin nudged Torvalds and whispered: "Did you ever think we'd be here?" At the end of trading, the company's shares were worth 239.25 apiece, up 697.5%, making it the best-ever first-day IPO performance.
That was then. This [yahoo.com] is now.
Re:Oh, poor underwriters, cry me a river (Score:2)
Re:Oh, poor underwriters, cry me a river (Score:2)
Lots of people made lots of money in the various IPOs during the dot-com boom. It wasn't really a matter of doing the right thing, or getting ahead through hard work, but instead just a matter of being in the right place at the right time.
Tradionally, it's been investment bankers and favored clients that made the most money in IPOs, but the dot-com boom allowed the average Joe to get in on it in many cases. Many made a few million, lots mad
And Google doesn't care... (Score:5, Insightful)
Re:And Google doesn't care... (Score:5, Interesting)
But, since it became clear Google was the last big pot of gold from the dot com boom I'm pretty confident Google has filled up with plenty of other people, mostly business people, who will do any evil, in a heart beat, to maximize the money they make out of the IPO. Maybe Larry and Sergey can fend them off or dilute them, but I imagine it depends on what percentage of shares they still hold and how much power they've given up in the march to Wall Street.
As soon as Google is on Wall Street and on the "make the quarterly numbers" tread mill I assure you they will probably also do just about any evil necessary, just look at Red Hat and VA.
Re:And Google doesn't care... (Score:3, Insightful)
Re:Dutch IPO and opening price favor insiders (Score:5, Interesting)
Don't be stupid. "Don't Be Evil" doesn't instantly mean "Don't Be Smart". They know what they're capable of, and earning lots of cash is a pretty obvious thing.
With google's ubiquity in almost everyone's daily internet life, the potential for misconduct is staggering. The fact that they haven't abused their position yet makes me proud of the fact that i can afford exactly 1 share of their stock right now.
Re:Dutch IPO and opening price favor insiders (Score:2)
Re:Dutch IPO and opening price favor insiders (Score:2)
Bullshit (Score:4, Informative)
What kind of bullshit law is this? Nothing. What you are talking about is what the stockholders and board of directors require the company officers to "exercise due dilligence" in keeping the company charter (ie, profitable as possible).
However, in Google's case, the board of directors is the main three who own voting stock, and the stock you get off the market is "non-voting stock". Read up on their released financial docs.
The guys at google aren't dumb. And they still have a potential to "not be evil". I have hope.
gravy train? (Score:5, Insightful)
That's how Linus made millions.
Here's an article in Business Week on the google IPO.
Commentary: Google This: Investor Beware
The Web search outfit's business is terrific, but its long-term outlook is cloudy
When Google Inc. predicted a wallet-cleaning price range of $108 to $135 for its shares on July 26, few on Wall Street flinched. And why should they? Despite a valuation as high as $36 billion for its offering expected in August, the search kingpin's business continues to dazzle. Growth in sales and profits have rocketed over 100% so far this year. And analysts project Google will generate more than $350 million in 2004 net profits. Even with stepped-up competition, Google's share of the U.S. search market has grown five points in the past year, to 37%, giving it a comfortable 10-point lead over Yahoo! Inc. (YHOO ), according to researcher comScore.
Sure, IPOs are inherently risky, but Google stock may be especially unwise at this nosebleed price range. At the midpoint price, Google's would-be $33 billion valuation is a step down from its closest competitor, Yahoo, a seasoned Internet giant with a diverse revenue stream and a market value of $40 billion. Compare projected 2005 earnings against these valuations, however, and Google's multiple is just a speck below Yahoo's. That's troubling, since Google is largely a one-trick pony, with no easy means to diversify its business and hefty management challenges. "It's priced for ultimate perfection," says a skeptical Google investor who plans on selling after the IPO.
Long-term investors should be very wary of Google's single-barrel business model. Selling ads that appear next to search results, or paid search, contributes over 80% of Google's sales. According to Forrester Research Inc (FORR )., the U.S. search ad market grew 94% in 2003 to $1.9 billion, but growth is expected to slow from 45% in 2004 to 16% in 2007. As long as Google remains so heavily dependent on a single search market, it should trade at a discount to Yahoo, says American Technology Research Inc. analyst Mark S. Mahaney. Citing its quiet period, Google won't comment.
Google co-founders Sergey Brin and Larry Page aim to expand into new businesses, but that won't be so easy. The most obvious foray would be into so-called branded marketing, the multimedia ads that adorn most Web sites. Unlike the text-only ads that accompany Google's search results, these snazzier ads entice large advertisers that are as concerned with building brand as they are with driving traffic to their sites. It's big business, worth about $4.5 billion in the U.S. this year, according to Forrester, vs. $2.8 billion for search ads.
Google, however, is a long way from proving itself a player in branded marketing. Sure, the six-year-old company is tinkering with a trial program that delivers targeted image ads from its roster of 150,000 advertising customers to other online content providers. But Google has not hinted at near-term plans to open up its own prime real estate for branded ads. Such a risky move would run contrary to Google's long-established mission of providing a sleek, simple page that favors speed over sizzle.
Even if Google does pull the trigger, it would desperately trail such rivals as Yahoo, Microsoft's (MSFT ) MSN, and AOL (TWX ), which have spent years building their salesforces and relationships with traditional marketers. Although Google points to its 150,000-plus advertisers, buyers of search ads often aren't the same people who buy branded ads. "The people who control these budgets are very different," says Wenda H. Millard, chief sales officer at Yahoo.
Google's management structure could also be a concern. The company prides itself on an organization that is nearly devoid of middle management and values freedom for engineers and their work. But Google's headcount is growing faster today than at any other time in its young life -- adding 3.
Re:gravy train? (Score:5, Interesting)
As for branded graphics ads, every computer I touch gets a copy of Firefox, adblock (with my own block recipe), pop-up blocking and flashblock. Text ads still come through, which is fine with me, since they aren't annoying, gawdy or out of place.
Re:gravy train? (Score:3, Insightful)
Re:gravy train? (Score:2)
How much is it worth then? $35 billion? $30 billion? $20 billion?
Re:gravy train? (Score:2)
Re:gravy train? (Score:2)
Google may be just a search engine right now but it on the brink of becoming the world's biggest ever data mining tool, offering marketers and governments incredible volumes of information. What can be done with the information Google gets from the public? Analysis and anticipation of product demand, habits, social trends, etc. In marketing, information is power and Google has the most information of all of the
that's not all... (Score:3, Informative)
Actually, my understanding is that they make more money off of licensing their technology [google.com] than off of paid search results. A lot of companies like to be able to search their internal documents without posting them publicly.
Put down that cross, somebody else needs the wood (Score:2, Insightful)
Cheers,
Erick
Re:gravy train? (Score:5, Informative)
Your claim that Linus made millions using precisely this system is incorrect. Yes, Linus was allowed to buy stock at bargain basement prices, and he earned a ton when the various Linux companies IPO'ed. The difference is, Linus was closer to an employee than to a traditional investor.
Here's the way I understand the situation, and please correct me if I'm wrong: When a company says, "We're expecting to go public at $5 a share, but we'll let Guybrush Threepwood buy a thousand of them at $1 a share," then the company is agreeing to give up $4000 of the money they could have received from the IPO. But when a stock brokerage says, "We're expecting this IPO to be worth $5/share, but we'll tell them to offer the shares for $4 so our investors will love us," they're taking 20% of the money that should have been obtained from IPO and putting it directly into investors' pockets. That's underhanded, and maybe even technically illegal. But it's what brokers do to keep their investors coming back for more.
Re:gravy train? (Score:5, Interesting)
No..I think Linus made money on an overpriced stock [yahoo.com]. Most investors got burnt. Buying an overvalued stock just because we love google here on /. will result in the founders of google getting rich and you ending up with worthless stock. I personally don't have anything against the auction system or Linus making money from the VA linux IPO. Question is: would I buy google? No..And the fact that evil vested interests from Wall street are saying the same thing about google's valuation won't change my decision.
Re:gravy train? (Score:2)
Silly me, I thought that Linus actually had something to do with creating the Linux phenomenon, rather than being a freeloader...
Re:gravy train? (Score:2)
About Linus and how he made his millions:
Inside Frank Quattrone's Money Machine [businessweek.com]
Linus is a genius, but he made his millions on an overvalued IPO and using the same Wall Street bankers that are being criticized for having a vested int
Re:gravy train? (Score:2)
Good, smart people who know how to get things done. Nothing bad can come out of this.
Yawn (Score:5, Insightful)
Who cares, the current task is to raise as much money for google as possible. Success will be raising more this way then a similar typical IPO.
When they sell underpriced shares, the company doesn't make as much as it should. This hurts the company as it doesn't get as much money as it should, and the existing shareholders, as they don't get the maximum value for the new shares they issue.
Who cares what "Wall Street" wants, it is the owners who matter.
Re:Yawn (Score:3, Insightful)
Once the ball is in play... (Score:5, Interesting)
It's an "in your face" shot to the IPO industry that profited on the
Re:Once the ball is in play... (Score:3, Informative)
Stock is sold to raise money, the point of the stock market is to ensure that there is a place to sell stock. What happens after the sale is important, yes, but if that was all there was it'd just be a high-priced "fantasy capitalist league" betting pool.
Of course there *are* those cynical enough to look at it that way.
kinda makes you wonder... (Score:5, Interesting)
Of course, if the reason is because then then Wall Street will ignore the stock and no institutions will recommend it, well, maybe that's a great reason not to do this. After all, it's not uncommon in other contexts to pay a 7% commission to someone who can get you a good price. I guess we'll have to wait and see whether not giving the Wall Street folk their usual vigorish is worth the risk.
Re:kinda makes you wonder... (Score:2)
It amazes me that some companies have gotten away with not even offering divi
It has been done before (Score:5, Interesting)
Google's IPO has already failed (Score:4, Insightful)
Re:Google's IPO has already failed (Score:5, Insightful)
The whole point of the dutch auction setup is to assure that if anybody makes a quick buck out of a market malfunction, it's the people are selling their shares in the first place. Having a stock double or triple on IPO day is a sign that the IPO price setters blew it... they could have charged double or triple in the first place and found people who would have paid it. The quick profits in that situation go to the "IPO Insiders" who bought the shares at the original IPO price and were able to make quick turnaround sales... since the average investor has little chance of getting in on an IPO that way, it's not really fair to the little guys.
Re:Google's IPO has already failed (Score:2)
Forget the Dutch auction crap, thats just on the IPO itself. The real trading takes place when you can go into your ETrade account and daytrade GOOG. Getting in on the IPO itself. If they would have gone out six months ago they would have burst out i
Agreed, they let Yahoo close the gap (Score:2)
It's not just in underwriting (Score:5, Insightful)
Oh come on. (Score:2, Funny)
Possibly redundant, but... (Score:5, Interesting)
Yeah, if there's anyone on the planet that i feel sorry for it's the investment bankers and their pissy little attitude b/c they aren't "in the loop" and google isn't bringing them into the "good ol' boys circle". Damn shame i tell you.
Note: not a chance in hell, i'll pay that much for google stock though. Not a chance.
Re:Possibly redundant, but... (Score:3, Informative)
though. Not a chance.
And that's the thing - only experts can possibly value a stock. What if a stock were $15.00 a share? Then would you buy? Or $15,000.00 a share? $0.15?
It's simply impossible to tell the value of a share just by looking at its proposed pricetag. You also have to know how many shares there are, and what the shares represent.
Heck, Berkshire Hathaway goes for $85,000 a share. Is that over-priced or under-priced?
Happily
Paranoid. (Score:3, Insightful)
It's fine to want to keep "big business" in check, but if you just throw out absolutely anything that appears to support your case, you just look ridiculous.
Wall Street loves leverage... (Score:3, Informative)
At times, these investors would also have to give commissions back to the underwriter in return for share allocations in some favorable IPOs. It can therefore be argued that the underwriter also has incentives to not act in the best interest of the issuer, and we can clearly see this when the average underpricing of a stock is significant.
One of the risks of using the auction is that those who bid very high can potentially corrupt the process, and cause inaccurate pricing. What may occur is that an institutional investor could bid at a (significantly) elevated level to ensure a share allocation. Their bid may not be representative of what they consider the value of the company to be. Nonetheless, if bidders are considered rational economic agents, high bidding will not only occur with a few investors, since people would expect a large degree of high bidding. This would therefore be incorporated in their valuation of the issuing company. Hence, the argument that if everyone overbids that the IPO will be overpriced may not necessarily be true in all circumstances. And Wall Street hates this theoretical implication, and the fact that they lose their leverage.
Sadly, you should pay attention to this.... (Score:5, Insightful)
There are a multitude of ways to depress a stock price. As Warren Buffett has said, in the short term, the stock market is a voting machine, and in the long term, it's a weighing machine. The Guys with the Money have a LOT of "voting" power.
Over the long haul, this won't work -- you can't artificially hold a stock worth X amount of money very far below X forever. But they don't NEED forever. If they sell short, bigtime, and can hold the price down for a year or so, then they win... everyone thinks Dutch Auctions are a losing proposition.
The guys doing this could very well take a serious bath (short sales and derivatives are dangerous), but they may figure this as a cost of doing business.... if this idea takes hold, it could cost them a lot more than the few hundred million dollars they might lose on this manipulation.
Because of this, I fully expect that the Google IPO shares will drop fairly dramatically once they go on public sale. Personally, I'll be looking to buy in the aftermarket.
Re:Sadly, you should pay attention to this.... (Score:4, Interesting)
I think you're right, but I don't think it'll work out like the big boys might want. The Dutch auction method changes the dynamics of an IPO. Traditionally IPO shares are bought to get in on the initial bounce. With that dynamic things would work exactly as you describe. But the initial bounce has already been priced into Google's shares by the auction method. The people looking for that initial rise aren't going to be buying Google shares at IPO. The ones buying will be the ones who figure Google shares will be valuable for things other than their price, eg. dividends, splits and other return over the long term. Those people won't sell just because of a 6-month downturn in the price, the price isn't the reason they're holding the stock. If Google's revenue or cash reserves go down then they might sell, because those affect why they bought the stock, but price bobbles won't have a major effect. If this is the case, then an attempt to force Google's price down will be a disaster for the ones trying it and won't, in the end, affect Google much at all.
Re:Sadly, you should pay attention to this.... (Score:4, Interesting)
But can "They" hang together enough to pull it off? It is a prisoner's dilemma. If all the bigwigs work together and keep the price down, the old boy's network survives and all of "Them" benefit. But if a significant fraction scoops up undervalued stock, the deserters win at the others' expense.
The classic solution to a prisoner's dilemma is to have some way for the group to enforce behavior on the individuals (this is why we have governments). How can "They" punish deserters or reward participants?
"Do No Evil" (Score:4, Insightful)
Here here !@ (Score:4, Interesting)
That's why I don't think you can trust anything Wall Street says about the Google IPO: The investment banking establishment has too much at stake and too many institutional conflicts of interest to make them credible on this offering.
I've been saying this since day one. The great thing about the Google IPO is that it puts the market back into balance - remember, shares are *supposed* to be valued based on direct investor demand, not insider deals and analyst payoffs. The Street will do what is in *it's* best interest, which means controlling the market (ahem, not a free market then eh?)
Not only is Google doing the auction [fool.com] to avoid insider deals (and keep that cash in the family), but it's spreading the offering among many, many different brokers [google.com], even progressive discount brokers [ameritrade.com] [/shamelessplug]!
Definitely *not* evil
Google and Virgin (Score:2)
Public companies reap the biggest benefits from having institutional investors (i.e. mutual funds, other big companies, banks, etc.) buy in their stock. While it sounds like a nice and noble thing having lots of individual investors buy your shares, that's usually not in the best interest of the company and its underwriters. Why? Because they aren't likely to buy the same volume of share
different situation (Score:2)
Yes, it's all a giant conspiracy (Score:2)
It seems to me that the market makers aren't big on Google because they don't think they'll make a lot of money on it. If it ends up in the hands of individual investors primarily that will probably make it a worse bet due to the fact that they're much more volatile.
Good! (Score:3, Insightful)
Wall street NEEDS massive reform. People should be able to buy shares direct, with NO COMMISSIONS. We don't NEED middlemen skimmers and manipulators and shills for "stock". And the next step is a mandated lawful minimum transfer time period of at least one year, to stop gambling and day trading speculation, help eliminate boom and bust cycles and "irrational euberance". Make the stock "market" turn back into investing like it's supposed to be and not poker chip trading based on ridiculous voodoo wave theories and astrology and "nightly business reports" corporate brokerage shilling.
And then, HONEST MONEY based on actual quantifiable tangible assets, not poof created "credit". SCREW the central banks, buncha outright scumbag thieves. No one "owes" them any "debt". They have nothing to actually loan except digits they create out of thin air on computers.. It's a congame, always been a congame, always will be a congame. They aren't respectable businessmen, they are pirates, hijackers of peoples wealth and productivity, crooks. As far as I am concerned they should be charged with capital T treason.
Short Version (Score:2, Interesting)
Misconceptions about function of underwriters (Score:3, Informative)
However, the key function of an underwriter / investment bank is to CREATE A MARKET. This includes some activities such as buying stock if the stock proves too weak too soon. They often have contracts that compensate them if the stock maintains a certain price for a certain amount of time. This is why IPO managers want to allocate stock to known people who will not sell and take a quick profit. There is no such protection with Google - anybody who buys the stock through the IPO can sell at any time (I believe - I have not read through Google's IPO site). I am, of course, not privy to the details of Google's IPO contract with their underwriters, however, it seems that the IPO manager would not want to guarantee stock prices when the manager has absolutely no control over who buys the stock and when they will sell.
I predict that the Google IPO will fail miserably - I don't predict this because I want to see it - I just think that given market dynamics, this is what will happen. Until a market is established for a stock, an IPO wants to be carefully managed, and Google is side-stepping that management process.
For one, I will be watching the price, and if and when it breaks, I will sell short. And I bet that I'll make at least a few dollars on the trade.
Anyone who is contemplating buying google owes it to themselves to read Reminiscences of a Stock Operator by Edwin Lefèvre. It is as relevant and educational today as when it was written 70 years ago!
I certainly may be proved wrong, and will be willing to learn something new. We'll all see soon, won't we!
Analysts are full of it -- I'll second that (Score:4, Informative)
So whether an analyst tells me that Google's IPO is overpriced, or the warnings are overblown (as this article claims), I pretty much take any of that advice with a whopping scoop of salt and do what I feel is best, given my knowledge in the area.
OMG not free roaming engineers (Score:2, Interesting)
This form of management could proove to be a problems since it is a significant cange from the traditional whips and shackles form of management. We would not want anything innovati
Unintended Consequences (Score:4, Interesting)
The real villian here is not the "Underpricing of IPO's", its the process of awarding the shares to the priviledged few as a perk. These people will hold the shares for as little as a few days and take a quick profit. They contribute little to the long term and just serve to get in the way of the investors that have a belief in what the company is doing.
Giving IPO's as a perk to insiders also serves to shove the fact the system is biased against small investors right in their face. This undermines investor confidence in financial institutions and weakens the overall financial system.
So I'm just confused (Score:4, Interesting)
So I've been trying to figure out: What happens to the Google stock price after the IPO?
Because $120 seems pretty clearly to be a silly price, at least compared to other stocks. I don't really think many people are going to want to buy at that price.
But, the thing is this. People know this ahead of time. No one is expecting the price to skyrocket immediately after stock launch. This means that, as this guy [slashdot.org] notes, if someone is buying Google stock at IPO they're probably buying it as a long term investment. At the very least, if you had just spent however much ridiculous amount of money that you have to spend to be one of the initial buyers in the IPO, and it immediately after IPO sinks $20, are you going to respond by going "oh shit, i'd better sell it now!"? No! That would be stupid! You sell at stock peaks, not valleys-- doing otherwise would limit your participation in the IPO to just throwing away the $20 per share you bought.
So the thing is this: demand for the Google stock at IPO time will likely be very low. But supply is also likely going to be very low-- because likely, and especially likely if the stock price sinks immediately after the IPO happens, the people who bought into that IPO won't be interested in selling what they have. So what does this all really mean for the stock price? Will the overvaluation be cancelled out by the fact that the IPO will attract the sort of people who won't want to sell what they just bought for a long time?
Meanwhile someone in the thread I just linked claimed that some people will be signing on to this IPO for the purpose of sabotaging it-- I.E., we'll see a fall in prices immediately after IPO launch because the big investment houses will be manipulating the stock down in order to discredit the dutch auction method. But if this is the case, once this manipulation-based fall is finished-- and it can't go on forever-- won't we immediately see a really large bounce in the other direction? If people are now widely expecting a drop in Google's price to occur immediately after the IPO launches, then doesn't this mean that anyone who wants the stock, but isn't in the IPO, will be operating on the strategy of: Hold off on buying at IPO launch, then wait for the inevitable post-IPO stock price correction to happen, then as soon as the price seems to have stabilized at its lower, corrected price, then buy. In other words, when the minima of Google's stock's first big dip occurs, it seems likely that a small flood of new interested buyers will come into play, possibly even triggering a rally.
Beyond this: the whole "options" thing. How does this work out? As far as I know the way this works is that a bunch of the people who work for Google, as well as Google's original VCs, have the right to buy the IPO stock at a price well below the actual IPO cost. Is this right? If so, then these people will likely be wanting to clear out as much of this stock as possible as soon as possible, right? Does this cancel out my "there won't be many sellers at IPO launch because of long-term investors" theory above, because the investors won't be providing supply for the stock at IPO launch, but the optionholders will be providing lots of supply? How significant of a proportion of shares will the optionholders hold within the greater block of google stock available?
One last thing: Does Google even care what happens to the
Re:So I'm just confused (Score:3, Informative)
That doesn't make sense. Why do you even care what the share price is? It means effectively nothing. Remember when ESR made an ass of himself with a very open letter about share prices to Sun's CEO?
Market capitalization is the number you want to be looking for.
What is likely to happen, by my guess, is that Google is going to have a relativel
No "good guys" or "bad guys" --- just "guys"... (Score:3, Interesting)
It's far from obvious that "Wall Street" wants Google to "fail" --- they're underwriting the Google IPO. Who do you think Morgan Stanley and CSFB are?
What's more, it's not obvious to everybody that Google's approach is necessarily motivated by helping individual investors (like the average Slashdot reader). For example, take Henry Blodget's recent column on Salon [slate.com]:
Recall that Google is also not the first dot-com darling to choose a dutch auction, either. Other notables include the stunningly successful Salon [salon.com] (heh) and --- wait for it --- Andover.net [slashdot.org], back in 1999.A Dutch Auction doesn't necessarily kill the initial pop in a stock offering (there's an argument that it'll increase the value of Google's shares in the early days), and it doesn't cut the underwriters out of the action. They just keep the money they'd be doling out to cronies.
Finally, "do-no-evil" pledge or not, there are objective criticisms [siliconvalley.com] of the way Google is handling this IPO, and they aren't coming from Wall Street.
Personally, I wouldn't know the first thing about the true motivations behind Google's actions, but my totally uninformed take is that Google is doing an auction IPO just to be iconoclastic.
Re:If googled failed... (Score:5, Funny)
Lisa: "College football diverts funds badly needed by education and the arts!"
Nerd in bleacher: "Is that true?"
Other nerd: "Let's get 'em!"
(Nerds start charging after the football players in the field)
Nerds: "Reeeee! ereeeee! reeeeee! reeeee!"
Re:No Purpose? (Score:5, Insightful)
It figures. Day traders do no good to the companies they invest, other then to demand immediate profits at the expense of long term solubility. Good riddance.
Re:No Purpose? (Score:5, Informative)
As a day trader, I'm sure you know that the price of the individual share has no individual impact on the total value of the company at all.
Re:No Purpose? (Score:3, Interesting)
And they will.
Re:No Purpose? (Score:2)
Your logic is neither interesting, nor particularly well-informed.
Demanding $100 - not at all (Score:2)
Re:No Purpose? (Score:3, Informative)
Google has at least three good reasons to do its IPO now.
1: Microsoft is preparing to enter the search engine business in earnest. They have very deep pockets, and no compunctions about stealing technologies, so Google is going to take a severe profitability hit even if they win the war as expected. Such battles cost money: Google needs enough money to not run out of software and hardware development and maintenance funds.
2: Some Google patent
Re:No Purpose? (Score:2)
Huh??
Google was awarded patents in 1990??
Pagerank patent owned by Stanford (Score:4, Informative)
Stanford has granted an exclusive Pagerank license until 2011. After that Stanford can license it to anyone they want until it expires in 2017.
Re:No Purpose? (Score:2)
According to my acquaintance at Google, Google owns them and they are expiring in the foreseeable future. This does not mean that Google created them in 1990, anymore than SCO ever wrote any actual UNIX source code simply because they now owns the copyrights. It means they bought the rights to that intellectual property, either as a licensed user or that they bought the patents outright.