Search for "Google IPO" at news.google.com and 24 of the 25 headlines that appear on the first page sound ominous or at least negative:
Google IPO not democratic on second viewing; Google IPO may not live up to its hype; Backlash Stinging Google's IPO; Google IPO loses luster amid Net downturn; Google's IPO plans start to sour; and Gagging On Google's IPO are a few examples.
Buygoogle.com has been reporting the benefits and risks of the Google IPO since it was announced in April -- everything from Barron's justification for a $50 billion market cap (Google's own estimates max out at "just" $36 billion), to the Motley Fool's advice to stay "far, far away" from the Google IPO. While this is the most corrosive press coverage we've seen, there is virtually no new information in any of these articles -- almost all of the info is a rehash of previously reported news.
In addition to last week's negative press, we have these recent stories:
The Wall Street Journal (subscription required) says CEOs of high-tech companies are not buying the Google IPO. "The CEOs of PeopleSoft Inc. (PSFT), JDS Uniphase Corp. (JDSU), EarthLink Inc. (ELNK), and Rambus Inc. (RMBS), among others, said they will not make personal investments in the Google IPO....several expressed concern about the 'hype' surrounding the offering as well as the unusual auction process Google is pursuing....consider it too risky an investment.... its valuation and associated risk/reward is outside my own investment parameters....unlikely for new investors to have a great return due to how the pricing is being done."
The New York Times interviews other Silicon Valley high-rollers, who also say they're "Loving Google but Not Its Public Offering." Apple's Steve Wozniak says, "I'm not buying." The article quotes "Silicon Valley entrepreneur" Jerry Kaplan as saying, "I wouldn't be buying Google stock, and I don't know anyone who would." "Mr. Kaplan said he had warned his mother not to buy Google stock." Mitch Kapor, "founder of Lotus Development, who runs the Open Source Application Foundation, ... predicted that even if Google successfully met its target price, those who bought the shares in the auction or in the early days of trading were likely to lose money....My sanity test was to ask, 'What are the chances in the next 18 months Google's stock price will be half of what it was on the day it went on sale?' '' he said. "I think there are three chances in four that will be true."
Motley Fool has a couple new critical articles. "Google's IPO Oops" argues that "enthusiasm for the IPO is sagging" due to the "unregistered share snafu" as well as "the offering's complex structure and the exceptionally high price that's being suggested." A piece by Bill Mann says that talk about the unregistered shares delaying the IPO is "balderdash," but that the IPO could be delayed or scrapped because "Google's IPO is not drawing the investor interest that everyone thought would be its divine right....Anecdotal evidence informs me that the underwriters are finding little demand for the Google IPO. If this is true, perhaps people are coming to the conclusion we came to back in April: This is an IPO that we're happy to watch but not participate in."
The Wall Street Journal notes that "the tone of commentary on the Google IPO has soured," and quotes a Google filing that states "there has been 'increased media coverage resulting' from its rescission filing" but it "was 'not an unanticipated development' and that its rescission offer is 'commonly made by companies' like Google."
So what's an individual investor to do? The pragmatic investor will wait out the IPO and consider a purchase once trading begins and volatility settles down. Or you could bet that all the bad publicity will scare off most investors, place your bid at 80% of your personal estimate of the company's valuation, and hope you get a nice pop. Just don't bet the rent money.
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More bad press on Google IPO - 8/07/2004 09:08:42 PM
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Google IPO Delayed One Week? - 8/05/2004 05:00:56 PM
CNBC reports that the Google IPO is being delayed one week due to "logistical problems" with institutional investors registering for the auction.
Although Google has not announced a date for the IPO, it is believed that bidding would begin one week after the registration process started, which would have been as early as Friday, August 6. Quoting "a person familiar with the matter," the Wall Street Journal reports that "the delay isn't being caused by a technological problem or a lack of bidders." |
Negative press on Google IPO - 8/04/2004 09:09:48 PM
There has been almost uniformly negative articles on the Google IPO since the company began issuing bidder IDs last week.
Today, the Wall Street Journal surveys large institutional investors and concludes that many "may just decide to walk away." The investors cite an "unusually brief IPO 'lockup' period" that will allow some insiders to begin selling their shares in as little as 15 days, compared with the customary 180 days for most IPOs. Other investors complain that the price is too high and the auction process is too confusing. After the hoopla that greeted the first news of the Google offering, there has been a growing view that ... the stock will be no bargain and that the clearing price at which the shares are sold could be at the lower end of the price guidance. Some investors say the negativity could allow them to put in bids around $110 and still get a block of shares at a reasonable price. They say they have little incentive against putting in a low bid, in hopes of getting some shares at a cheaper price. CBSMarketWatch.com surveys small investors, and finds that they, too are "saying 'No' to Google IPO." Several investors zero in on the per-share price, saying things like, "$100 is too much for a company that only supplies information." These investors apparently do not understand that the company's valuation is determined by the number of shares times the price, not the per-share price itself. Slate gambles on Google and bids for 5 shares "out of curiosity and fun," but asserts that the rational investor would "just decide to invest in Google (or not) after the stock started trading, when we knew what we could buy it for, rather than now, when we have to guess." The famous (infamous?) author appears to have learned from his experience as a net stock analyst and says that expecting to make money on the Google IPO is a "terrible idea:" There are multiple ways we can lose the Google game, and only one way we can win. We can lose—money, time, and/or potential profits—by: 1) bidding within the "winner" range, getting shares, and having the stock drop (likely); 2) bidding so high that our bid is dismissed as "speculative," not getting shares, and having the stock rise (less likely); or, 3) underbidding, not getting shares, and having the stock rise (less likely) The only way we can win, meanwhile, is if we bid in the "winner" range but below the price at which the stock trades in the aftermarket (highly unlikely). One reason IPO auctions have essentially been abandoned worldwide is that these odds stink. To add insult to injury, Google announced today that it may have issued 23 million shares illegally, "injecting an unexpected legal risk into the online search engine leader's highly anticipated IPO" (from the WSJ, subscription required). The contrarian may read all this bad press and see an opportunity to get into the IPO at a reasonable price if many of the large and small investors are sitting on the sidelines. |
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